USD near 10-week low as investors worry about rising inflation, AUD continues the uptrend as retail sales shows much economic strength

USD languished at around 10-week low as investors bet that the Fed would maintain its loose monetary policy due to the less optimistic job market. The five-year breakeven inflation rate, which measures expectations on inflation, has reached its highest point since April 2011 on Monday. The 10-year expectation also rose to the highest point since 2013.

The equity market responded with a similar outcome and was largely dragged down by tech stocks. Dow Jones Industrial Average fell 0.1%, S&P down 1% and Nasdaq Composite declined about 2.6%. Citigroup has downgraded Google and Facebook from “buy” to “neutral”. Analysts believe that ads revenue will likely decline in the future.

AUD has been performing quite well in May so far. According to the latest data, Australia’s retail sales gained 1.3% MoM and 2.0% YoY, pointing to a stronger consumer spending. Moreover, RBA has updated its forecast on the economy by the end of 2021. Unemployment has been adjusted downward from 6% to 5%, and GDP adjusted upward from 3.5% to 4.75%.