It was a busier morning on the Australian economic calendar. After a quiet start to the week, the focus turned to consumer spending and retail sales figures for February.
Retail sales increased by 0.2% in February versus a forecasted 0.1% rise. In January, retail sales surged by 1.8%.
According to the ABS,
- Spending in food-related industries was upbeat, with cafes, restaurants, & takeaway food services reporting a 0.5% increase.
- Food retail sales increased by 0.2%.
- However, non-food industry sales figures were less bullish.
- Department store sales increased by 1.0%, with clothing, footwear, & personal accessory retailing up 0.6%.
- Other retailing bucked the trend, falling by 0.4%, with household goods retailing unchanged.
While the headline figure was better than expected, the figures are unlikely to raise concerns among RBA board members about demand-driven inflationary pressures.
The RBA has signaled a possible pause on interest rate hikes to assess the impact of monetary policy tightening on consumers, inflation, and the economy. The latest retail sales figures should give the RBA greater incentive to hit pause at the April 4 meeting.
According to the RBA meeting minutes from March, board members agreed to consider hitting pause next month. Members cited concerns about the economy, with economic indicators coming in weaker than expected.
AUD/USD Reaction to Retail Sales
Ahead of the retail sales figures, the AUD/USD fell to an early low of $0.66440 before rising to a pre-stat high of $0.66619.
However, in response to the retail sales figures, the AUD/USD rallied from a post-stat low of $0.66587 to a high of $0.66787.
This morning, the AUD/USD was up 0.43% to $0.66785.
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Up Next
The RBA will be in the spotlight this morning, with RBA Board Member Connolly speaking. Reaction to today’s retail sales figures and the possible influence on monetary policy would move the dial.
Later today, US consumer confidence figures will also influence. An unexpected pickup in consumer confidence would weigh on the AUD/USD. Economists forecast the CB Consumer Confidence Index to fall from 102.9 to 101.0.
The Federal Reserve will be in the spotlight this afternoon. The Committee on Banking, Housing, and Urban Affairs will meet in an open session to conduct a hearing on “Recent Bank Failures and the Federal Regulatory Response.”
With banking sector-related jitters lingering, the Fed will likely deliver assurances of containment. However, credit crunch commentary would influence market risk sentiment.
