• Australian retail sales vastly missed the consensus in August
  • Former RBA member Edwards suggests a hike could be on the cards despite sluggish inflation
  • Trade data beats expectations, the overall outlook remains bleak though
  • AUD is by far the worst performing currency in G10

The Asian session has been quite upbeat when it comes to stock markets as the Hang Seng (HKComp on xStation5) has gained so far as much as 0.8% while the Australian equity market has been flat. Nevertheless, the Australian dollar got a massive blow as retail sales disappointed across the board making the AUD the worst performing currency among its peers in the G10 basket.

link do file download linkAustralian retail sales plunged in August which could drag down household outlays going forward. Source: Macrobond, XTB Research

First and foremost, retail sales came in at -0.6% mom while economists surveyed by Bloomberg had predicted a 0.3% yoy increase. Moreover, the prior release was revised down from 0% mom to -0.2% mom. It was the feeblest reading from early 2013 and could act unfavorably in terms of household expenditure as both metrics are fairly well correlated.

The nasty print could quell expectations as far as an immediate rate hike is concerned. Nevertheless, the former member of the Reserve Bank of Australia has begged to differ. He said, if output growth is satisfactory the RBA may well begin to tighten despite still subdued inflation. Let’s also recall that we knew the account from the latest RBA meeting on Tuesday which turned out to be a bit more dovish than usual, hence when we add the ugly retail sales report it suggests the Australian central bank seems to be a long way off from a major change in its policy.

On the other hand, trade data was slightly better than expected as a trade surplus rose from 808m AUD (revised up from 460m AUD) to 989m AUD in the prior month. However, needless to say that it’s much less relevant compared to retail sales, hence AUD traders focused heavily on the latter. As a result the AUD is losing ground against the USD being down 0.5%.

link do file download linkThe AUDUSD is heading south after the pair has failed to break its crucial resistance zone. The next goal traders could aim for seems to be placed at around 0.7750. That said, the NFP reading scheduled on Friday might be a game changer. Source: xStation5