- US retail sales surge 17.7% in May, doubling analysts’ expectations of 8%
- Data adds to risk on sentiment after Fed announces corporate bond purchases
- Riskier Australian Dollar (AUD) rallies, safe haven US Dollar (USD) falls out of favour
- At 13:45 UTC, Australian Dollar US Dollar exchange rate (AUD/USD) trades +0.2% at US$0.6935
The Australian Dollar is pushing higher versus its US counterpart on Tuesday, adding to gains from Monday. The Aussie Dollar settled 0.8% higher on Monday at US$0.6917, towards the high of the day.
At 13:45 UTC, AUD/USD is trading +0.2% at US$0.6935, at the upper end of the daily traded range as investors cheer the record-breaking jump in US retail sales and more support from the US Federal Reserve.
Risk sentiment performed a dramatic U-turn in the previous session after the Fed announced that it will start buying up individual corporate bonds today, as it continues its efforts to support market functioning and ease credit conditions. The announcement from the Fed calmed investors, who had been growing nervous over a second wave of coronavirus infections hitting the US and China.
As sentiment lifted, the riskier Australian Dollar surged, whilst demand for the safe haven US Dollar declined.
Today risk sentiment was given an additional boost following the release of US retail sales. Retails sales rebounded by almost 18% in May as consumers began spending again as states started to gradually reopen following the coronavirus lockdown.
The May reading of 17.7% This was the biggest monthly jump in spending on record and was more than double economists’ expectations of an 8% increase. It also more than made up for the -16.4% decline in April.
Investors will now look towards Federal Reserve Chair Jerome Powell as he testifies before Congress. Investors will be keen to see whether recent upbeat data has adjusted the outlook of the Fed, which was particularly gloomy last week.
Second tier domestic Australian data will also be in focus heading into Tuesday. Both home sales and Westpac’s leading indicator data will be eyed. These data points come after the minutes to the Reserve Bank of Australia’s June meeting revealed few surprises.
RBA Governor Dr Philip Lowe was of the opinion that the coronavirus downturn would be less severe than initially thought. The RBA also reaffirmed that they are willing to keep monetary policy loose until the economy recovers.
