AUD/USD remains capped under 0.6600, eyes on Australian Retail Sales

  • AUD/USD trades on a soft note near 0.6573 amid the stronger USD.  
  • The US Core PCE for December rose 0.2% on the month and was up 2.9% on a yearly basis.
  • A stimulus measure from Chinese authorities last week helped boost the Aussie.
  • The Australian CPI data and the FOMC meeting will be in the spotlight this week 

The AUD/USD pair remains capped under the 0.6600 mark during the early Asian session on Monday. The firmer US Dollar (USD) and higher US Treasury bond yields weigh on the AUD/USD pair. Investors await the Australian Consumer Price Index (CPI) data and the Federal Open Market Committee (FOMC) meeting this week for fresh impetus. The pair currently trades around 0.6573, down 0.11% on the day. 

Data from the Commerce Department reported on Friday that the US Core Personal Consumption Expenditures Price Index (PCE) for December, an important gauge for the Federal Reserve, rose 0.2% on the month from 0.1% in the previous reading and increased 2.9% on a yearly basis from the previous reading of 3.2%. The headline PCE, including volatile food and energy costs, grew 0.2% for the month and held steady at 2.6% annually. Additionally, US pending home sales came in at 8.3% MoM in December versus -0.3% prior, above the market consensus of 1.5%. 

Now that inflation is cooling, investors anticipate the Federal Reserve (Fed) to begin easing the policy. According to the CME FedWatch Tool, futures traders have priced in a 53% likelihood that the Fed would cut interest rates for the first time this cycle in the March meeting.

On the Aussie front, stimulus measures from Chinese authorities helped boost the China-proxy Australian Dollar (AUD) last week. Beijing unveiled a plan for improving liquidity in the banking system, while the People’s Bank of China (PBoC) reduced China’s reserve ratio requirement by 0.5 percentage points. There are also increasing expectations that Chinese officials might look into a package of steps to stabilize the country’s falling stock market.

Traders will keep an eye on the December Australian Retail Sales on Tuesday. The monthly Australian CPI inflation data will be due on Wednesday, which is estimated to ease to 3.7% YoY in December from 4.3% in the previous reading. Later on Wednesday, the FOMC will announce the interest rate decision, with no change in monetary policy expected.