AUD/USD: Australian Dollar Shrugs as Australian Retail Sales Jump
2024.07.03 09:48
The is drifting on Wednesday. AUD is trading at 0.6674 in the European session, up 0.11% on the day.
Australian Retail Sales Climb 0.6%
Australian consumers have been counting their pennies and reducing discretionary spending. Consumers are feeling the double squeeze of high borrowing costs and stubborn inflation, but retail sales pulled a surprise today with a gain of 0.6% m/m in May. This followed a meager gain of 0.1% in April and crushed the market estimate of 0.3%.
This marked the sharpest gain since January, but it does not mean that Australian consumers have suddenly switched to a spendthrift mindset. Rather, the jump in retail sales was the result of many retailers involving large discounts and sales events. The monthly May release was strong, but there is an underlying weakness in consumer spending, as retail sales climbed just 1.7% YoY in May, compared to over 4% in early 2023. This means that the retail market remains weak despite today’s upbeat report.
The Reserve Bank of Australia has stressed that rate hikes are on the table, as stubbornly high inflation has raised concerns that monetary policy may have to be tightened. The RBA discussed the possibility of a rate hike at each of the past two meetings, and today’s strong retail sales could strengthen the case for a hike, although policymakers won’t make a rate decision based on one release.
The second-quarter report, which will be released a week before the RBA meeting on August 6, will play a key role in the . The markets have priced in a 32% chance of a quarter-point at the August meeting, according to the ASX rate tracker. This would bring the cash rate to 4.6% and mark the first rate hike since last November.
AUD/USD Technical
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