AUSTRALIAN DOLLAR MAINTAINS ITS POSITIVE TRAJECTORY DESPITE A DOWNBEAT AUSSIE RETAIL SALES

• Australian Dollar appreciates for the second straight session amid a stable US Dollar.
• Australia's Retail Sales (MoM) declined by 2.7% in December against the expected fall of 0.9% and the previous growth of 2.0%.
• US Dollar faced a challenge on lower US yields due to the healthier US balance sheet.
• US Treasury Department plans to borrow $760 billion in Q1 lower than the previous estimate of $816 billion in October.

The Australian Dollar (AUD) continues to gain ground on Tuesday amid a stable US Dollar (USD). The AUD/USD pair received upward support as United States (US) bond yields declined in the previous session, a trend attributed to the healthier US balance sheet. Since October 2023, the decrease in yields has contributed to the sustainability of the US Treasury, and stronger economic growth has led to improved tax receipts. The US Treasury Department recently announced plans to borrow $760 billion in the first quarter, which is lower than the previous estimate of $816 billion in October.

Australia's Bureau of Statistics released the seasonally adjusted Retail Sales (MoM) for December on Tuesday, indicating a decline of 2.7%. This figure contrasted with the expected fall of 0.9% and marked a notable reversal from the previous growth of 2.0%. Surprisingly, the Aussie Dollar (AUD) strengthened despite the release of disappointing consumer spending data. The AUD's resilience could be attributed to positive sentiments stemming from news about additional stimulus measures in China, consequently motivating the AUD/USD pair. Furthermore, the Australian Consumer Price Index (CPI) data will be eyed on Wednesday, which is expected to decline by 0.8% in the fourth quarter from 1.2% prior.

The US Dollar Index (DXY) shows stability after experiencing losses on Monday, attributed to improved US Treasury yields. The risk aversion sentiment could intensify as the administration of US President Joe Biden is anticipated to authorize military strikes in response to the recent drone attack on a US outpost in Jordan, resulting in the death of three US troops and injuries to at least 24.