Australian dollar falters as weak retail data mutes rate hike chatter
Reuters|
Updated: Oct 05, 2017, 12.25 PM IST
SYDNEY: The Australian dollar stumbled on Thursday after a second straight monthly fall in retail sales highlighted the need for interest rates to remain at record lows for some while yet.
Thursday's data from the Australian Bureau of Statistics (ABS) showed retail sales dropped 0.6 per cent in August, confounding expectations for a 0.3 per cent increase. July was also revised down to show a 0.2 per cent fall.
The 0.8 per cent slump in July and August is the biggest back-to-back fall since October 2010.
The Australian dollar slipped to $0.7824 immediately after the release, from a one-week high of $0.7875 set on Wednesday. It last held at $0.7827.
The Reserve Bank of Australia (RBA) has long feared ballooning debt in Australia's red-hot property sector was pinching consumers' ability to spend elsewhere in the economy.
It expects the country's A$1.7 trillion economy to accelerate at 3 per cent over the next two years, although economists see slim chance of achieving that.
"The weakness in retail sales supports our long-held view that a slowdown in consumption growth is one reason why the RBA won't raise interest rates at all next year," said Paul Dales, chief economist at Capital Economics.
"The outlook isn't encouraging either, with household finances continuing to be squeezed by weak wage growth and the full effect of higher energy bills yet to be felt."
The futures market narrowed the probability of a rate increase next year, pushing out the timing for a fully priced-in 25-basis-point rise to October 2018 versus the August timing seen just last week.
Technical analysts are keeping a close eye on key chart support at $0.7783, a break below which could see further losses in the Australian dollar, said Matt Simpson, Singapore-based senior analyst at Faraday Research.
Across the Tasman Sea, the New Zealand dollar edged down to a more than one-month low of $0.7146. It last traded at $0.7155.
The kiwi is currently heading for its second straight weekly loss, partly on a rising US dollar and election-related uncertainties at home.
The greenback inched up against a basket of its peers on Thursday after data shed a positive light on the US economy.
Figures out on Wednesday showed US service sector growth hit its fastest in 12 years in September and private employers added more jobs than forecast despite the effects of Hurricanes Harvey and Irma.
New Zealand government bonds rose, sending yields about 1 basis point across the curve.
Australian government bond futures edged higher, with the three-year bond contract up 3 ticks at 97.870. The 10-year contract added 2 ticks to 97.1850.
Thursday's data from the Australian Bureau of Statistics (ABS) showed retail sales dropped 0.6 per cent in August, confounding expectations for a 0.3 per cent increase. July was also revised down to show a 0.2 per cent fall.
The 0.8 per cent slump in July and August is the biggest back-to-back fall since October 2010.
The Australian dollar slipped to $0.7824 immediately after the release, from a one-week high of $0.7875 set on Wednesday. It last held at $0.7827.
The Reserve Bank of Australia (RBA) has long feared ballooning debt in Australia's red-hot property sector was pinching consumers' ability to spend elsewhere in the economy.
It expects the country's A$1.7 trillion economy to accelerate at 3 per cent over the next two years, although economists see slim chance of achieving that.
"The weakness in retail sales supports our long-held view that a slowdown in consumption growth is one reason why the RBA won't raise interest rates at all next year," said Paul Dales, chief economist at Capital Economics.
"The outlook isn't encouraging either, with household finances continuing to be squeezed by weak wage growth and the full effect of higher energy bills yet to be felt."
The futures market narrowed the probability of a rate increase next year, pushing out the timing for a fully priced-in 25-basis-point rise to October 2018 versus the August timing seen just last week.
Technical analysts are keeping a close eye on key chart support at $0.7783, a break below which could see further losses in the Australian dollar, said Matt Simpson, Singapore-based senior analyst at Faraday Research.
Across the Tasman Sea, the New Zealand dollar edged down to a more than one-month low of $0.7146. It last traded at $0.7155.
The kiwi is currently heading for its second straight weekly loss, partly on a rising US dollar and election-related uncertainties at home.
The greenback inched up against a basket of its peers on Thursday after data shed a positive light on the US economy.
Figures out on Wednesday showed US service sector growth hit its fastest in 12 years in September and private employers added more jobs than forecast despite the effects of Hurricanes Harvey and Irma.
New Zealand government bonds rose, sending yields about 1 basis point across the curve.
Australian government bond futures edged higher, with the three-year bond contract up 3 ticks at 97.870. The 10-year contract added 2 ticks to 97.1850.
