- Australian retail sales come in above expectations
- RBA jawbones the Australian exchange-rate
- AUD the strongest currency in the morning
The Asian session did not abound in many relevant macroeconomic releases except for one concerning the Australian dollar. Australian retail sales turned out to be better than expected showing an increase 0.3% mom against a forecast at 0.2% mom. Moreover, in terms of a quarterly basis there was even a more impressive reading as we got a rise 1.5% qoq while an estimate suggested just 1.2% qoq. For that reason the Australian dollar is arguably the strongest currency within G10.
Nonetheless, not all was favorable to the AUD. The RBA released its Statement on Monetary Policy (SoMP) where we could have found some dovish remarks. The most important are as follows:
- Says recent rise in AUD has had modest dampening effect on economic forecasts
- Says further rise in AUD would lower economic growth, inflation
- Sees unemployment little under 5.5 pct by end 2019, recent jobs data provides more confidence
- Trims GDP forecast for December 2017 to 2-3 pct, December 2018 unchanged at 2.75-3.75 pct, 2019 raised to 3-4 pct
- Underlying inflation forecasts unchanged at 1.5-2.5 pct end 2017 and 2018, 2-3 pct by end 2019
- Forecasts based on technical assumption of AUD staying at $0.8000 (the spot price is even slightly below that level, hence it could be AUD-positive)
- Says wage growth expected to remain subdued, increase only gradually
By and large, the RBA hasn’t been too dovish thus far suggesting it could tolerate slightly higher AUD in the future. However, remarks pertaining to wage growth are not so reassuring as they see not mounting pressure on wages which could have a neutral or even adverse effect on inflation growth.
The AUDUSD has respected a rising trend line which could herald a continued uptrend in the nearest future. Having said that, the US jobs report could significantly affect the pair. If the trend line is broken, declines toward 0.7830 cannot be ruled out.