AUD/USD rallies on consumer spending surge, markets price RBA hikes

AUD/USD advanced 0.65% (45 pips) to 0.6475 after Australian retail sales data revealed a robust 0.6% monthly increase, doubling economist expectations of 0.3%. The spending surge, particularly in discretionary categories, challenges the RBA's view that household consumption remains subdued. Markets have aggressively repriced RBA expectations, with overnight index swaps now indicating a 40% chance of a rate hike by March 2025, compared to rate cut expectations just last week. The Australian 3-year bond yield jumped 12 basis points to 4.15%, reflecting the hawkish shift. Technical analysis shows AUD/USD maintaining momentum above the 200-day moving average at 0.6440, with next resistance at 0.6500. The combination of sticky inflation and resilient consumer spending positions the RBA as an outlier among developed market central banks, supporting further AUD strength against currencies where easing is expected.