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Australian Dollar Declined as Soft Data Rekindled RBA Rate Cut Bets

Australian Dollar Declined as Soft Data Rekindled RBA Rate Cut Bets

Daniel Dubrovsky, Strategist

Talking Points:

  • Australian Dollar declines more than 0.9% versus the US Dollar
  • April’s trade balance is –AU$3888M, a record high deficit
  • Soft data offers counter argument to RBA’s natural policy tone

The Aussie declined more than 0.9 percent versus its US namesake after the release of Australia’s April trade balance and retail sales. The data fell short of expectations with the country having a record deficit of –AU$3888M in April versus -AU$2100M expected. Retail sales also came in weaker at 0.0 percent (MoM) in April versus 0.3 percent (MoM) in March.

On Monday the Reserve Bank of Australia remained neutral in its monetary policy stance rather than turning dovish, this drove Aussie higher. On Wednesday, better than expected 1Q GDP likely caused the Aussie to gain against its US namesake as the data supported RBA’s monetary policy tone.

A round of weak data from Australia today offered conflicting viewpoints to the country’s 1Q GDP figures. The central bank did hint on Monday that any further rate cuts are likely to be made on how incoming data unfolds. A record deficit and weaker retail sales likely rekindled RBA rate cut bets, causing the Australian Dollar to decline against the US Dollar. Simultaneously, Australian government bond yields declined suggesting the move lower reflected building rate cut speculation.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.