AUD remains under pressure as US retail sales surge
Daily Currency Update
The Australian dollar remains under pressure, unable to sustain a break above US$0.65 amid stronger than anticipated US retail sales data. For a moment the AUD outperformed all major counterparts, surging back through US$0.65 and marking session highs north of US$0.6510 after People’s Bank of China (PBoC) cut the Medium-Term Lending Facility rate to 2.5%. With China activity across retails sales, fixed asset investment, and industrial production all trending lower through July, the easing signal from the PBoC was seen as a sign of new urgency from policy makers and officials, and bolstered hopes a more extensive and comprehensive stimulus plan would soon be introduced. The uptick in sentiment didn’t last long and the AUD began tracking lower as markets digested the RBA policy minutes and quarterly wage price index report. With wages printing below consensus and the RBA suggesting there is a credible path back to inflation targets under the current monetary policy setting, expectations for future rate hikes faded, with the policy makers expected now to merely tinker around the edges as data directs. With the early upturn fading, the AUD slipped back below US$0.65 and fell steadily overnight drifting toward US$0.6450 as new US retail sales exceeded expectations.Our attentions turn now to the RBNZ’s policy update, UK CPI inflation data, and Euro area Q2 GDP data, while top Chinese policy makers meet to discuss potential stimulus measures.
Key Movers
Despite a plethora of data and a deluge of negative headlines, price actions across major currency markets was relatively muted through trade on Tuesday. Japan GDP surged through Q2 up 1.5%, well beyond market expectations and placed Japan as the fastest growing developed economy through H1. Initially the print fuelled hopes the BoJ would be forced to move away from its ultra easy policy, but a closer look showed growth fuelled by net exports, while domestic demand remains week, affording policy makers scope to maintain its accommodative policy setting. The yen tracked sideways for much of the day with the USD bouncing between 145.10 and 145.80. With the euro maintaining a narrow trading handle and the Chinese yuan trading through 7.30 and marking fresh lows at 7.33, our attentions shifted to the GBP. Sterling was one of the best performing major currencies overnight, buoyed by stronger than expected wage data. Having climbed back above 1.27, Sterling upside was best realised vs the NZD and AUD where it marked new 3-year lows, forcing the NZD below 0.47. Stronger than expected US retail sales, an uptick in US treasury yields, and sustained negative sentiment helped support the USD and the DXY index held steady through the day.Our attentions turn now to UK CPI data where we expect further easing in price pressures and Euro Area GDP data.
Expected Ranges
- AUD/USD: 0.6400 - 0.6530 ▼
- AUD/EUR: 0.5880 - 0.6000 ▼
- GBP/AUD: 1.9480 - 1.9820 ▲
- AUD/NZD: 1.0750 - 1.0950 ▼
- AUD/CAD: 0.8680 - 0.8780 ▼