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Australian Dollar Declines as Retail Sales Fuel RBA Rate Cut Bets

Australian Dollar Declines as Retail Sales Fuel RBA Rate Cut Bets

2016-04-04 03:10:00
Daniel Dubrovsky, Analyst
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Talking Points

  • AUD/USD declines after Australia released February retail sales figures
  • Resale of new and used goods 0.0% versus 0.4% expected and 0.3% prior
  • Data likely fueled RBA rate cut bets as 2-year government bond yields fell

Losing money trading the Australian Dollar? This might be why.

The Australian Dollar declined against its US namesake after Australia released its retail sales figures for February. Resale of new and used goods came in at 0.0 percent (MoM) versus 0.4 percent expected and 0.3 percent in January. The last time the country experienced neither growth nor contraction in retail trade was in December 2015.

As the data crossed the wires, Australian 2-year government bond yields declined more than 0.8 percent. This means that the worse-than-expected figures likely fueled near term RBA rate cut speculation. Overnight index swaps are pricing in at least 1 from the Reserve Bank of Australia on its main lending rate over the next 12 months.

Lower than anticipated store purchases could mean reduced economic growth. A decreased flow of capital within the economy as a result of this can impede on RBA’s 2 to 3 percent target range for inflation. This could cause the central bank to react by cutting rates.

Australian Dollar Declines as Retail Sales Fuel RBA Rate Cut Bets

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