The Australian Dollar (AUD) is rebounding modestly against the US Dollar (USD) on Friday, retracing some of the previous session's losses. Australia's Retail Sales—a key indicator of consumer spending—increased by 0.3% month-over-month in March, up from a 0.8% rise in February (revised from 0.2%), according to data released Friday by the Australian Bureau of Statistics (ABS). However, the figure fell short of market expectations, which had forecast a 0.4% gain.

However, the AUD/USD pair remains vulnerable as falling metal prices weigh on sentiment. Key commodities like iron ore, copper, and gold declined amid renewed concerns over a global economic slowdown, pressuring the commodity-linked Aussie Dollar.

The upside of the AUD/USD pair could be restrained as signs of easing US trade tensions support the Greenback. Investor sentiment shifted after US President Donald Trump signaled potential trade deals with India, Japan, and South Korea, and expressed optimism about resolving tensions with China.
According to Bloomberg, China is considering renewed trade talks with the US. The Chinese Commerce Ministry noted that Washington has reached out to express interest in resuming negotiations. However, China is reportedly conducting an internal assessment and maintains that the US should correct its tariff-related actions, which it views as the unilateral trigger for the ongoing trade dispute.

Australia heads to the polls this weekend, and the outcome presents several risks for the Australian Dollar. Current polling slightly favors incumbent Prime Minister Anthony Albanese, but the race remains tight. A key concern is the possibility of Albanese winning only a minority, forcing him to form a government with the support of the Greens and/or independents, raising the risk of more expansive fiscal policies and potential fiscal slippage. Another short-term risk is the potential for a delayed result, with no clear outcome emerging for several days after the vote.

Meanwhile, inflationary pressures in Australia in early 2025 have weakened expectations of further monetary easing by the Reserve Bank of Australia (RBA). However, markets anticipate a 25-basis-point rate cut in May, as policymakers prepare for possible economic fallout from the recently introduced US tariffs.

Source: Fxstreet