The Australian dollar is slightly lower on Monday, trading at 0.6635 in Europe. AUD/USD is coming off a disappointing week, with losses of close to 1%, as risk aversion remains high. The banking crisis may have eased, but there are fresh worries, such as a credit crunch. Australia releases retail sales on Tuesday (Australia time), with the markets braced for a slowdown.
Australian retail sales expected to de-accelerate
Australian retail sales are a key gauge of consumer spending, and things looked rosy in January, when retail sales hit 1.9%, rebounding from -4.0% a month earlier. The estimate for February is a modest 0.4%. High inflation and rising interest rates are taking a toll on consumer spending. The economy expanded by 2.7% y/y in the fourth quarter of 2022, with strong consumer spending a major driver of the growth.
The Reserve Bank of Australia raised rates by 25 basis points earlier this month, bringing the cash rate to 3.60%. The markets are projecting a terminal rate of 4.2%, which would mean at least two more rate hikes. We’re likely to see another 25 bp increase at the April 4th meeting.
The bank crisis continues to weigh on risk sentiment, and the latest development centered on giant Deutsche Bank, as its costs against default soared. Deutsche Bank shares plunged 8.2% on Friday, but this latest scare should blow over, as the bank has reeled off 10 straight quarters of profit.
Central bankers are scrambling to reassure jittery investors that the banking system is safe. RBA Assistant Governor Kent has said that Australian banks are “unquestionably strong” in the midst of the “strained” conditions in the global financial markets. On Friday, the US Treasury Department said that the Financial Stability Oversight Council, which is a group of financial regulators, agreed that the US banking system was “sound and resilient”. The stresses on the banking system are being closely watched by central banks, which are fearful of the contagion spreading as well as a credit crunch, which could dampen economic growth.
AUD/USD technical
-
AUD/USD faces resistance at 0.6676 and 0.6728.
-
0.6594 and 0.6542 are providing support.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities.
Opinions are the authors — not necessarily OANDA’s, its officers or directors. OANDA’s Terms of Use and Privacy Policy apply. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Recommended Content
Editors’ Picks
AUD/USD remained bid above 0.6500
AUD/USD extended further its bullish performance, advancing for the fourth session in a row on Thursday, although a sustainable breakout of the key 200-day SMA at 0.6526 still remain elusive.
EUR/USD faces a minor resistance near at 1.0750
EUR/USD quickly left behind Wednesday’s small downtick and resumed its uptrend north of 1.0700 the figure, always on the back of the persistent sell-off in the US Dollar ahead of key PCE data on Friday.
Gold holds around $2,330 after dismal US data
Gold fell below $2,320 in the early American session as US yields shot higher after the data showed a significant increase in the US GDP price deflator in Q1. With safe-haven flows dominating the markets, however, XAU/USD reversed its direction and rose above $2,340.
Bitcoin price continues to get rejected from $65K resistance as SEC delays decision on spot BTC ETF options
Bitcoin (BTC) price has markets in disarray, provoking a broader market crash as it slumped to the $62,000 range on Thursday. Meanwhile, reverberations from spot BTC exchange-traded funds (ETFs) continue to influence the market.
US economy: slower growth with stronger inflation
The dollar strengthened, and stocks fell after statistical data from the US. The focus was on the preliminary estimate of GDP for the first quarter. Annualised quarterly growth came in at just 1.6%, down from the 2.5% and 3.4% previously forecast.