- Australian retail sales dive by record -17.9%
- Risk sentiments improves on economic recovery hopes
- Will FOMC minutes mention negative rates?
- At 13:45 UTC, AUD/USD +0.5% at US$0.6575
The Australian Dollar continues to gain traction versus its US counterpart for a third straight session on Wednesday. The Aussie Dollar US Dollar exchange rate rallied 1.9% across Monday and Tuesday this week.
At 13:45 UTC, AUD/USD is trading an additional 0.5% higher at US$0.6575 just shy of Tuesday’s two and a half month high and taking gains for the week to 2.4%.
Investors are shrugging off the record fall in Australian retail sales. Retail sales slumped -17.9% in April, after a record surge of 8.5% in March. This was its biggest fall ever recorded.
Every sector experienced a decline reflecting the dire consumer mood amid the coronavirus crisis. With unemployment set to rise to 11.7% by the middle of the year and remain elevated for the next 18 months, discretionary spending is unlikely to rebound strongly anytime soon.
Investors will now look ahead to the release of PMI data on Thursday morning local time. A speech by Reserve Bank of Australia’s Governor Dr Philip Lowe could also provide fresh impetus for the Australian dollar.
The weakening of the US Dollar across the board is boosting the pair. Risk sentiment remains fragile, however it is picking up across the start of the US session as investors cling to hopes of a recovery from the coronavirus slump. US stocks are expected to jump on the open, after a more downbeat European session.
Investors will now turn their attention to the release of the minutes from the April 28/29 Federal Reserve monetary policy meeting. Investors will pour over the minutes for clues as to any possible changes to monetary policy.
Discussion surrounding negative interest rates have been making the headlines over the past week. Whilst Fed speakers have talked down the possibility of negative rates, any positive comments on negative rates in the minutes could drag on the US Dollar.
Federal Reserve Chair Jerome Powell has made several appearances this week – a TV interview and a joint appearance with US Treasury Secretary Steve Mnuchin before the Senate banking committee. With this in mind, the minutes are unlikely to reveal anything new.