AUD/USD remains sideways on flat Australian Retail Sales, RBA/Fed policy in focus

• AUD/USD oscillates above 0.6400 amid flat Australian Retail Sales data.
• A historic surge in inflation could compel the RBA to sound more hawkish.
• The Fed is set to hike interest rates by 75 bps for the fourth time.

The AUD/USD pair is displaying a lackluster performance despite the Australian Bureau of Statistics having reported the monthly Retail Sales data at 0.6% in line with the projections and the prior release. The Australian Retail Sales data is contaminated with mounting price pressures and unchanged retail sales indicate a decline in retail demand.

This week, the major event for Aussie investors will be the interest rate decision by the Reserve Bank of Australia (RBA). Last week, the Australian economy saw a historic surge in the inflation rate. Price growth in the third quarter landed at 7.3% against the projections of 7.0% and the prior release of 6.1%. As inflationary pressures have not displayed signs of exhaustion yet and also are increasing at an increasing rate, RBA Governor Philip Lowe could continue policy tightening further.

In October monetary policy, RBA policymakers voted for a lower rate hike to keep economic prospects steady while simultaneously working on the agenda of bringing price stability. It would be worth watching whether the RBA would continue October’s rate hike of 25 basis points (bps) or return to the 50 bps rate hike spell chosen earlier.

Meanwhile, the US dollar index (DXY) is near the day’s high at 110.8 as investors are shifting their focus toward the monetary policy of the Federal Reserve (Fed). The risk profile is turning averse as returns on US government bonds have accelerated. The 10-year US Treasury yields have recovered to 4.03%. While the S&P500 futures are facing a mild correction.

As price pressures have not displayed signs of a slowdown, the Fed will continue its ultra-hawkish tone and announce more policy-tightening measures. The Fed is expected to hike interest rates by 75 basis points (bps) consecutively for the fourth time.