• The Australian Dollar gains ground as Retail Sales exceeded the expected increase in August.
• The AUD remains solid as the RBA to keep the monetary policy restrictive in the near term.
• The US Dollar advances as Fed Chair Powell said the central bank will lower its benchmark rate ‘over time.’

The Australian Dollar (AUD) holds gains against the US Dollar (USD) on Tuesday, following better-than-expected Retail Sales data. Australian Bureau of Statistics (ABS) reported the primary gauge of Australia’s consumer spending, which rose 0.7% month-over-month in August, exceeding the market expectations of a 0.4% increase.

The AUD receives support from the hawkish sentiment surrounding the Reserve Bank of Australia (RBA) regarding its interest rate trajectory. The RBA kept its cash rate at 4.35% for a seventh consecutive meeting and stated that the policy would need to stay restrictive to ensure inflation slowed. Additionally, China’s stimulus measures have improved the demand outlook in Australia's largest trading partner, driving up commodity prices and strengthening the commodity-linked Australian Dollar.

The uptick of the AUD/USD pair could be restrained due to the stronger US Dollar (USD), which could be attributed to the latest remarks from the Federal Reserve (Fed) Chairman Jerome Powell. On Monday, Powell said that the central bank is not in a hurry and will lower its benchmark rate ‘over time.’ Fed Chair Powell added that the recent half-point interest rate cut should not be seen as an indication of similarly aggressive future actions, noting that upcoming rate changes are likely to be more modest.