AUD/USD drops below 0.6600 ahead of the Chinese economic data

• AUD/USD holds below the 0.6600 mark, its largest drop since November.
• Fed’s Waller advocates moving carefully with rate cuts.
• China’s Premier Li Qiang said China’s economy grew by about 5.2% in 2023.
• The Chinese economic data and December US Retail Sales will be in the spotlight on Wednesday.

The AUD/USD pair trades in negative territory for the fifth consecutive day during the early Asian session on Wednesday. The downtick of the pair is backed by the stronger US Dollar (USD) as investors decline their bet on rate cut speculation from the Federal Reserve (Fed). AUD/USD currently trades near 0.6583, up 0.02% on the day.

On Tuesday, the US NY Empire State Index for January came in at -43.7 versus -14.5 prior, weaker than the market expectation of -5. The figure registered the lowest reading since 2020.

The Fed Governor Christopher Waller said on Tuesday that interest rate cuts are likely this year, but the central bank should not rush to cut its benchmark interest rate until it is clear that lower inflation will be sustained. The markets have priced in 60% odds on a rate cut in March, down from 80% at the end of last week. This, in turn, boosts the Greenback broadly and acts as a headwind for the AUD/USD pair.

There will be no economic data releases from the Australian docket on Wednesday. China’s Premier Li Qiang said on Tuesday at the World Economic Forum’s annual meeting in Davos that China’s economy grew by about 5.2% in 2023, slightly better than the official target Beijing had set. Investors await the key Chinese data release later in the day, including the Industrial Production, Retail Sales, and Q4 Gross Domestic Product for fresh impetus. The stronger-than-expected data might cap the downside of the China-proxy Australian Dollar (AUD).

Apart from this, the US Retail Sales for December will be released on Wednesday, which is forecast to grow by 0.4% MoM from 0.3% in the previous reading. Furthermore, the Fed’s Beige Book will be due, and FOMC Barr, Bowman, Woods, and Williams will speak.