Risk-off impulse, and US consumer’s higher inflation expectations, bolstered the USD

Sentiment remains deteriorated. US Retail Sales in March dropped 1% MoM, disappointing analysts and indicating a sharper contraction than the anticipated 0.4%. Annual data for the month was 2.9%, falling short of the previous month’s 5.9%. Simultaneously, the Fed disclosed that Industrial Production had decreased for the first time in 2023, expanding only 0.4% MoM, trailing behind February’s 0.9% data and lower than the projected 0.2%. A reduction in durable goods caused a decline in production output.

In April, the University of Michigan (UoM) Consumer Sentiment poll indicated a rise in sentiment from 62 to 63.5. However, there was a 1% increase in inflation expectations for one year, climbing from 3.6% to 4.6%.

Following the UoM report, the AUD/USD extended its losses, as shown by US Treasury bond yields pushing higher, while the US Dollar (USD) jumped from new two-week lows of around 100.788, as portrayed by the US Dollar Index (DXY).

On the Australian front, a solid employment report crushing estimates of 20K, at 53K in March, suggests that although the Reserve Bank of Australia (RBA) paused hiking rates, the RBA might resume its campaign as the Unemployment Rate dipped to 3.5% from 3.6%. In the latest meeting, the RBA’s Governor Philipe Lowe said that the pause did not imply that further increases were off the table and commented that the central bank would be data dependent