Australian Dollar Recovers; Retail Sales and RBA Minutes in Focus

The Australian dollar (AUD) began the week with a notable rebound, halting a six-day decline that saw it lose 3% against the US dollar (USD). Currently, AUD/USD is trading at 0.6203 in North American trading, marking a 0.71% increase for the day.

Key Economic Data on the Horizon

Traders are now anticipating the release of Australian retail sales figures on Tuesday. Analysts predict a 0.3% month-over-month increase for January, a significant recovery from December’s 0.1% decline. This prior drop, the first in nine months, contributed to the Reserve Bank of Australia’s (RBA) decision to cut interest rates last month – their first reduction in four years. Another negative retail sales report could signal further economic weakness, potentially prompting the RBA to consider additional rate cuts.

Also on Tuesday, the RBA will release the minutes from its February meeting. Investors will closely examine these minutes for insights into the rationale behind the recent rate cut and any hints regarding future monetary policy. The RBA’s “hawkish cut” suggests a cautious approach, aiming to temper expectations of a prolonged easing cycle similar to those seen in other major economies. The central bank remains concerned about potential inflationary pressures and current market expectations are for the next rate cut to occur no sooner than May.

The RBA is also monitoring the potential impact of US President Trump’s tariffs, particularly the risk of a renewed US-China trade dispute. As China is Australia’s largest trading partner, a trade war would adversely affect the Chinese economy, leading to reduced demand for Australian exports.

US Manufacturing Shows Signs of Stagnation

In the United States, the ISM Manufacturing PMI for February fell to 50.3, down from 50.9 in January and below the expected 50.5. This indicates a slowing manufacturing sector, with a potentially worsening outlook due to the possibility of renewed US tariffs against Canada and Mexico this week.