Australian Dollar holds gains as RBA could keep monetary policy restrictive

• The Australian Dollar gains ground as Retail Sales exceeded the expected increase in August.
• The AUD remains solid as the RBA could 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. The 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.