The Australian dollar has weakened sharply today, after very disappointing retail sales figures. Month-over-month retail sales fell 0.6% vs. expectations of 0.3% growth. As worries mount regarding economic growth in Q3, the Australian dollar has weakened as a result. Despite today's set-back our short-term outlook on the Australian dollar remains neutral. In earlier weeks, the currency was selling off thanks to weakness in the Chinese yuan (China is the country's biggest trading partner) and in industrial commodity prices.
AUD/USD is currently trading below 0.7830. Looking at EUR/AUD, the exchange rate is now back above 1.50, and is currently above 1.5020. Finally, the pound has also gained against the Aussie, with the exchange rate above 1.6910.
On Monday, we saw fairly strong manufacturing survey data (54.2) and strong inflation figures as well (2.5% YoY). Tuesday's Reserve Bank of Australia interest rate decision and statement was a non-event, as we covered in our preview. Today, we saw weak retail sales data overshadow strong trade balance numbers given concerns regarding future economic growth.