AUD/USD struggles to touch 0.6800 ahead of RBA Minutes, US Retail Sales

After a two-day losing streak, the Australian dollar (AUD/USD) is under pressure, which has dampened the corrective rally from late Monday. Chinese data-related worries, dovish fears about the Reserve Bank of Australia (RBA), and market inflation all contribute to the pair’s poor performance. The Fed’s policy SPECULATIONS and market-wide cautious optimism gave the price a floor.

With US Retail Sales being watched in the midst of the Fed’s blackout, the RBA Minutes will provide justification for “finely balanced” pauses in rate hikes. The pair is also stuck near 0.6820 as traders wait for the Reserve Bank of Australia’s most recent monetary policy meeting minutes early on Tuesday. This is the result of a gloomy start to the week and an inability to hold the corrective rally.

Chinese headline numbers supported market concerns over China’s economic downturn, which in turn joined US-China conversations to highlight worries about Beijing and put downward pressure on the AUD/USD. China’s second-quarter 2023 GDP increased from 4.5% to 6.3%, exceeding prior figures, but falling short of economists’ expectations of 7.3%. Retail sales, however, fell to 3.1% from 12.7% the previous quarter and the 3.2% market expectation.

US Treasury Secretary Janet Yellen stated that the US is closely examining outbound investment limitations on China, but she made it clear that these controls would not be extensive enough to fundamentally alter China’s investment environment. The US-China dispute is once again in the news, although the level of pessimism seems slow and inconsistent. Australian Treasurer Jim Chalmers put downward pressure on the AUD/USD and raised economic concerns for the important Pacific nation. The New York Empire State Manufacturing Index’s July soft readings combined with the market’s risk-on attitude gave the AUD/USD bears a break.

Looking ahead, the RBA Minutes will be observed to gauge the catalysts behind the pause in a rate hike trajectory and predict the future moves of the Australian central bank. The incoming RBA Governor Michele Bullock isn’t known as a hawk, so downbeat RBA Minutes and pessimism may allow her to keep the easy money policy on the table.