The Australian dollar fell sharply earlier today on weak retail sales figures. This is the second month of weak retail sales, and the trend of weak household spending is starting to look concerning. While the consensus expected month-over-month retail sales to grow by 0.4%, growth was 0% instead. The previous retail sales growth figures announced in October were negative, leading to hopes that this month's numbers would be stronger. Given the importance of household consumption, this lowers the outlook for Australian economic growth. Yesterday, strong exports supported the growth outlook, as iron ore exports were much stronger than forecast.
AUD/USD is currently trading just below 0.7680. Looking at EUR/AUD, the pair is currently just below 1.5170. The GBP/AUD exchange rate is currently below 1.70.
This is a pretty light week for the Australian dollar. New home sales (-6.1% vs. 9.1% prior) and private sector credit (0.3% vs. 0.5%) were weak and lower than previous figures. AiG performance of manufacturing indices were also lower than the previous figure (51.1 vs. 54.2 prior). Trade balance figures were much higher than expectations (1745m vs 1200m expected), on higher exports of industrial metals. Retail sales figures once again widely missed expectations this week (0% vs. 0.4% expected). Last week saw inflation figures miss expectations.
Following a small rebound, we are upgrading the Australian dollar to neutral. Looking at a daily chart of the Aussie, the currency is now trading within normal conditions, and does not appear to be oversold. This is based on various technical indicators.
After weakening sharply in the latter half of October, we are downgrading the Australian dollar further to bearish. The currency is weak thanks to lower-than-expected inflation rates and falling Australian bond yields. Looking at a weekly chart, the Aussie has re-entered normal trading conditions having been overbought for most of September. Our analysis is based on various technical indicators.