Meanwhile, Australian retail sales data will influence sentiment toward RBA policy and AUD/USD price trends. Economists forecast retail sales to rise 0.3% month-on-month in May, reversing a 0.1% fall in April.
A sharp pickup in retail sales could ignite inflation concerns, supporting a less dovish RBA rate path. Falling bets on multiple RBA rate cuts would bolster Aussie dollar demand, sending AUD/USD higher. However, an unexpected drop in retail sales may signal a more dovish RBA policy stance.
RBA Governor Michele Bullock, in May’s press conference, emphasized:
“RBA expects lower rates and rising wages to boost household consumption. But spending has not picked up as much as expected. The Australian labor market and household spending remain the most significant domestic risks.”
Later today, the ADP employment report and Fed speakers will dictate US-Australian interest rate differentials and AUD/USD sentiment.
Weaker labor market data and dovish Fed comentary would narrow the rate differential favoring the Aussie dollar. This could send AUD/USD toward $0.66.
Conversely, better-than-expected US numbers and hawkish Fed signals may widen the rate differential favoring the US dollar. A wider rate differential on a less dovish Fed policy stance may pull AUD/USD toward $0.65.
