AUD/USD Jumps Above 0.7600 As Weak US Data Drags Dollar Lower

AUD/USD strengthened to around 0.6715 in early European trading on Thursday. The Australian dollar rose on encouraging Australian retail sales in May, which boosted the case for the Reserve Bank of Australia (RBA) to raise interest rates.

Australia’s retail sales growth in May was stronger than expected, reinforcing the argument that the RBA could raise interest rates as early as August. Data released by the Australian Bureau of Statistics (ABS) on Wednesday showed that Australia’s retail sales rose 0.6% month-on-month in May, compared with a previous increase of 0.1%. In addition, Australia’s Purchasing Managers’ Index (PMI) improved slightly in June, which also contributed to the rise of the Australian dollar.

On the other hand, weaker-than-expected US economic data continued to drag the US dollar lower. Data released by the Institute for Supply Management (ISM) on Wednesday showed that the US Services Purchasing Managers’ Index fell to 48.8 in June from 53.8 in the previous month, below the market consensus of 52.5.

However, the cautious stance of Federal Reserve (FED) officials may boost the US dollar and limit the upside of the currency pair. Chicago Fed President Austan Goolsbee said earlier Thursday that it would take time for inflation to return to 2% and that there was still a lot of data to watch on the economy.

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