The Australian dollar is in negative territory on Thursday. In the North American session, AUD/USD is trading at 0.6558, down 0.20%. On Wednesday, the Australian dollar fell as low as 0.6536, its lowest level since August 8.
Australian retail sales falls to 0.1%
Australian retail sales slowed to 0.1% m/m in September, down sharply from 0.7% in August and shy of the market estimate of 0.3%. Annually, retail sales grew 2.3%, down from 3.1% in September and the lowest level in four months.
The weak retail sales data points to a sluggish economy and consumers holding the purse strings tight before spending. Households continue to be squeezed by high interest rates and sticky inflation. This could translate into negative growth in the third quarter, as household consumption accounts for about 50% of the country’s GDP.
The Reserve Bank of Australia meets on Nov. 5 and is virtually certain to hold rates at 4.35%. Inflation slowed to 2.8% y/y in the third quarter, finally falling back with the RBA’s 2%-3% target for the first time since Q1 2021. Still, it’s too early to declare victory in the battle against inflation, as core inflation is running around 3.5% and services inflation at 4.6%. Until these indicators show a steady decline, the RBA will remain an outlier among most major central banks, which have been cutting rates in response to lower inflation.
The Federal Reserve delivered an oversized cut of 50 basis points in September but is expected to return to the traditional 25-bp cuts. The Fed’s preferred inflation indicator, the Personal Consumption Expenditures (PCE) Price index, was unchanged in September at 2.7%, above the market estimate of 2.6%. Monthly, the PCE price index crept up to 0.3% from a revised 0.2% in August and in line with the market estimate. This was the highest monthly level in five months and bolsters the case for a modest 25-bp cut at the Nov. 7 meeting.
AUD/USD Technical
- AUD/USD tested resistance at 0.6541 earlier. Below, there is support at 0.6509
- There is resistance at 0.6568 and 0.6600
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