AUD/USD tumbles to near 0.7030 on downbeat Australian Retail Sales

The AUD/USD pair has sensed immense selling pressure and has dropped to near 0.7030 as the Australian Bureau of Statistics has reported downbeat monthly Retail Sales data (Dec). The economic data has shown a de-growth of 3.9% vs. the expectations of -0.3% and the prior release of 1.4%.

Retail demand has been slowed down dramatically despite the Christmas season, which was expected to spur consumer spending after three consecutive pandemic-locked Christmases.

Despite a massive decline in retail demand, the Reserve Bank of Australia (RBA) might continue to hike interest rates further as the fourth quarter Consumer Price Index (CPI) has refreshed multi-year highs at 7.8%.

Going forward, the Australian Dollar will dance to the tunes of the Caixin Manufacturing PMI data, which will release on Wednesday. As per the projections, the manufacturing PMI will advance to 49.5 from the prior release of 49.0. The Chinese economy is operating at full capacity levels after dismantling the pandemic controls and therefore, a recovery in economic demand cannot be ruled out.

Meanwhile, Bloomberg reported that Bloomberg’s aggregate index of eight early indicators showed a slight uptick in Chinese economic activities in January, versus a contraction in December. Also, confidence among small businesses was better in January than in December, with real estate, transport, accommodation, and catering activity seeing a sharp rebound, according to Standard Chartered Plc.

It is worth noting that Australia is a leading trading partner of China and rising economic activities in the Chinese economy will support the Australian Dollar.

On the United States front, the US Dollar Index (DXY) is aiming to extend its upside journey after a minor pullback. Volatility has been spurted ahead of the interest rate decision by the Federal Reserve (Fed), which has trimmed the risk appetite of the market participants.