The Australian dollar recovered from one-week lows against the US currency on Wednesday after a stronger-than-expected retail sales report saw investors price back in an interest rate hike in the next twelve months. Interest rate futures moved to almost fully price in the risk of a hike in the next 12 months, up from around a 70 percent chance before the data was released.
That saw the Aussie jump to $0.9601/04 against the US dollar, from around $0.9533 before the data and $0.9550/55 late here on Tuesday. It had struck a one-week low of $0.9512 in offshore trade.
Data on Wednesday showed retail sales rose 0.7 percent in May, the biggest gain in six months and beating forecasts of a 0.2 percent increase. The jump came a day after the Reserve Bank of Australia (RBA) cited easing demand and a softening labour market as reasons to keep rates steady at 7.25 percent, despite stubbornly high inflation pressures, following its monthly policy meeting. "The data supported a view that another rate hike is not entirely out of the question," said Besa Deda, senior currency strategist at St George Bank. "But we think rates are on hold for the rest of the year and today's data has not really convinced me that there is a turnaround in consumer sentiment and demand."