Retail Sales Miss Expectations. RBA to Cut Soon?
AUD
The Aussie Dollar starts Friday lower against most majors after yesterday’s Australian Retail Sales fell short of expectations, increasing by 0.8% in November (exp. 1%). While the figure represents the largest increase in 10 months, as Black Friday discounting drew cost-conscious shoppers, the miss in expectations reinforces bets of a rate cut by the RBA next month, with money markets upping their odds of a cut to 76%. China is also weighing on the AUD as their Annual Inflation Rate figures came out on expectations at 0.1% which is a decrease from the previous reading of 0.2%. Asian equities finished the day down with NIKKEI -0.9%, SHANGHAI COMP -0.6% and locally the ASX -0.2%. Commodities were mixed with Gold 0.2%, Silver -0.1%, Iron Ore 0.1% and Copper 1.2%. There is no data out of Australia or China today.
USD
The AUDUSD pair opens lower at 0.6195 as the USD continues to perform strongly on the stubborn inflation outlook. US equities ended the day mixed with the DOW JONES 0.3%, S&P 0.2%, and the NASDAQ -0.1%. Investors expect Donald Trump’s pro-growth and inflationary policies to keep the Fed leaning hawkish. These expectations continue to strengthen the USD and locally exporters are only buying enough AUD to fulfill short term needs as they see further downside the AUDUSD pair. Markets are now looking ahead to tonight’s employment data as the US has both their Non Farm Payrolls and Unemployment Rate prints. Non Farm is expected to decrease to 160k and the Unemployment Rate is expected to remain unchanged at 4.2%. These prints are likely to shape the Fed’s rate decision at their next policy meeting on Jan 29.
EUR
The AUDEUR pair opens lower at 0.6014 despite Euro Retail Sales coming in under expectations at 0.1% (exp. 0.4%). European equities ended the day mixed with the DAX -0.1% and the CAC 0.5%. Tonight, France has their Industrial Production M/M and Italy has their Retail Sales Print. Europe is struggling amid a weak economic outlook, leading markets to increase bets that the ECB could fasten its easing cycle to avoid inflation going below its target range as well as stimulating growth.
GBP
The AUDGBP pair opens flat at 0.5028 as the UK records high bond yields and fiscal worries. The FTSE closed the day up at 0.8%. UK bond yields rose to their highest level in 16 years as confidence in Britain’s fiscal outlook deteriorated. Usually, a higher yield would boost the Sterling, however, that relationship has broken, reflecting investors’ worries about the country’s finances. No major data out of the UK until next Wednesday when they have their Inflation Rate print.
NZD
The AUDNZD pair opens down at 1.1064 as the Kiwi faces challenges due to the growing likelihood of aggressive monetary easing. The RBNZ is anticipated to reduce the current cash rate of 4.25% by 50 basis points during its February meeting.