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Australian Dollar Knocked By Retail Miss Despite Trade Gains

Australian Dollar Knocked By Retail Miss Despite Trade Gains

David Cottle, Analyst


Talking Points:

  • Australian retail sales fell 0.6% in August, well below forecasts
  • Trade data were much perkier, offsetting the previous month’s disappointment
  • Investors focused on the former

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The Australian Dollar slipped Thursday, despite news of a blockbuster trade surplus, as retail sales data released simultaneously registered a nasty expectation miss.

August’s hefty surplus of A$989 million (US$777 million) was a blockbuster for a month in which forecasters’ views had centred on one of A$850 million. July’s had been something of a shocker. It limped in at A$460 million when the markets had hoped for a billion-dollar surplus, so August’s print goes some way toward redressing the balance. In any case, we now learn that that figure has been revised upward, massively, to A$808 million.

While the Australian export machine would once again seem to be firing, the same can’t be said for the nation’s consumers. Retail sales fell by 0.6% on the month in August, well ahead of the 0.3% fall predicted. Despite low unemployment levels Australians are groaning under record levels of debt. The Reserve Bank of Australia would clearly like them to responsibly pay this down without debt repayment causing a massive reduction in consumer spending. But this trick can be a very difficult one to pull off, as perhaps these latest numbers show.

AUD/USD certainly took a modest hit on the numbers.

On its daily chart AUD/USD has clearly snapped out of the quite impressive uptrend which had been in place since mid-July. Aussie weakness was exacerbated this week by the Reserve Bank of Australia. It left its Official Cash Rate on hold at its record low 1.50%, to the surprise of no one. But its accompanying statement did not sound like that of a central bank in any hurry to tighten policy and, for good measure, it also took a jab at Aussie Dollar strength.

That said the currency seems to have found support just above the 0.7782 level which was July’s low point. Momentum indicators also suggest that the Australian currency is starting to look a little oversold.

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX

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