Aussie Retail Sales Tipped to Dip Today

AUD

The AUD is mixed this morning after a quiet night in macro data releases left market looking for direction. Aussie-linked commodities were fairly flat overnight with Gold moving up 0.1%, Silver up 0.4%, SGX iron ore up 0.5% and CMX copper gaining 0.5%. The ASX was also flat over the last session. Today Australian retail sales data is due and markets expect a modest fall (-0.1% m/m) in nominal retail sales for February. Recent prints have likely been affected by events around the turn of the year (and difficulties surrounding seasonal adjustment); February data should provide a clearer view of recent momentum. High frequency card spending data suggest goods consumption has been weak, which may have been partly offset by the continued growth in dining out sales. Tomorrow Australia’s CPI y/y will print, with markets currently pricing in a small inflation rate drop from 7.4% previous to 7.2%, This is released at 11:30am eastern time tomorrow, and is one of the key factors RBA governor Lowe highlighted for the next RBA interest rate hike. We also have Chinese Manufacturing and Non-Manufacturing PMIs on Friday, both with expansionary numbers priced in.

USD

The AUDUSD pair is flat on yesterday, opening this morning at 0.6646, oscillating in a tight range of 27bps since markets opened on Monday. FOMC Member Jefferson delivered a speech titled "Implementation and Transmission of Monetary Policy". He said “it will take time to reduce some inflationary factors because they have shown to be persistent”. No reaction from markets as interest rate expectations have had a few weeks of massive change and uncertainty. The Fed is now torn between cutting interest rates to ease volatility and uncertainty in the banking sector and raising rates to fight inflation. Wall St was mixed overnight with the Dow Jones +0.6%, the S&P 500 +0.3% while the NASDAQ was -0.4%.   US. 2-year yields rallied 23bps driven largely by the calmer banking sector while crude oil gained 5.4% to $73 a barrel. A big second half of the week for US data coming with CB consumer Confidence being released on Wednesday night, Final GDP q/q on Thursday (2.7% increase priced in), and Core PCE Price Index on Friday (markets pricing in a 0.4% increase).

EUR

The AUD falls to last week's lows against the Euro over night after better than expected German Business data further strengthened the Euro, opening up at 0.6151 this morning. It continues to bounce of the 0.6150 resistance level – testing this level 3 times overnight and twice last Friday. The German Ifo business confidence index increased for the sixth month in a row, coming in at 93.3 from 91.1 in February, lower wholesale gas prices and the reopening of the Chinese economy have boosted economic confidence for Europe’s largest economy. However, whilst this appears to be a divergence between the real economy and the financial market turmoil, the Ifo index often reacts with a delay of one or two months, there is a lag from financial markets into real world economic indicators. The ECB’s Simkus said bank liquidity and capitalisation is high in the Euro-area while the international situation requires monitoring. Meanwhile, the Chairman of the Basel Committee on Banking Supervision, Pablo Hernandez De-Cos, commented that Euro-zone banks are well prepared for adverse scenarios. ECB’s Nagel said QT should be accelerated from summer. He continued saying Europe’s banking, financial system is resilient and the ECB has suitable instruments to offer support if needed. He also commented that interest rate increases to date – 350bps since last July – have yet to show their full effect on the economy. The DAX and CAC were both up, 1.1% and 0.9% respectively. Upcoming in the Eurozone economic calendar is the German, French, Italian, CPIs as well as ECB president Legarde speaking tomorrow night.

GBP

The AUDGBP pair forges new lows at the beginning of this week, struggling to hold the 54 handle, down -1.8% on last week and -4.7% on this time last month. The AUD has not been this weak against the GBP since February last year, 13-month lows. A hawkish speech from BOE governor Bailey pushed the already falling pair down further. Key takeaways from Bailey’s speech “Additional tightening required if inflation continues”, “We have seen some big strains in parts of the global banking system emerge”. Up coming data this week includes BOE meeting minutes, the BOE statement, Current Account, currently with -17.5B priced in, and Final GDP q/q with a flat 0% priced in.

NZD

The AUD had a rally against the NZD last night, before falling from a high of 1.0745 to 1.0724 this morning. Fairly quiet week ahead for the Kiwi’s economic calendar. Building Consents m/m printing on Thursday, seeing a -1.5% at last release, and ANZ business confidence, showing a -43.3 index figure on last release.