AUD/USD holds steady as US data, Chinese support balance outlook

• US Retail Sales surprise to the upside in November, reinforcing the view of a still resilient economy.
• US inflation figures strengthen expectations of a steady policy stance from the Federal Reserve.
• The Australian Dollar finds support from Chinese data and firmer expectations toward the Reserve Bank of Australia.

AUD/USD trades around 0.6680 on Wednesday at the time of writing, virtually unchanged on the day, as investors digest a series of key macroeconomic releases from the United States (US) and Asia.

On the US side, Retail Sales rose by 0.6% in November, well above market expectations of 0.4%, following a 0.1% contraction in October. These figures, published by the US Census Bureau, point to resilient household demand. At the same time, the Producer Price Index (PPI) increased by 3% YoY in November, exceeding expectations, while core PPI also rose by 3% annually. On the consumer side, the Consumer Price Index (CPI) climbed 2.7% YoY in December, in line with forecasts, while core inflation came in at 2.6%, slightly below expectations.

This set of data reinforces the view that the Federal Reserve (Fed) is likely to keep interest rates unchanged at its upcoming meeting. Market pricing continues to suggest that the first rate cut is unlikely before mid-year, providing fundamental support to the US Dollar (USD).

In Australia, the Australian Dollar (AUD) draws additional support from developments in China. China’s Trade Balance posted a surplus of $114.1 billion in December, exceeding expectations and supporting currencies sensitive to Chinese growth dynamics, such us the Aussie. Domestically, Australian housing data also underpin the currency. Building Permits surged 15.2% MoM in November to 18,406 units, a near four-year high, marking a sharp rebound after the previous month’s decline.

Persistent strength in housing demand could keep the Reserve Bank of Australia (RBA) cautious on inflation dynamics, despite a recent moderation in consumer price pressures. This backdrop fuels expectations that monetary policy could remain restrictive for longer than previously anticipated, offering structural support to the Australian Dollar.

Overall, the AUD/USD pair remains in a wait-and-see mode, caught between still-solid US fundamentals and region-specific factors favoring the Australian Dollar, as investors look for fresh macroeconomic catalysts to drive a clearer directional move.