Australian Retail Sales Jumps 0.7% But Unlikely to Influence the RBA

Highlights

• Australian retail sales beat expectations, rising 0.7% in May.
• However, the latest numbers are unlikely to shift sentiment toward the RBA monetary policy outlook after Wednesday’s inflation numbers.
• Later today, Fed Chair Powell, US Q4 GDP, and initial jobless claims will move the dial.

It was a busier morning on the Asian economic calendar. Retail sales and business confidence numbers for Japan and New Zealand drew early interest. However, retail sales figures for Australia were more significant this morning.

Australian retail sales figures increased by 0.7% in May versus a forecasted 0.1% increase. In April, retail sales stalled.

According to the ABS,

• There were marked increases in other retailing (2.2%) and cafes, restaurants, & takeaway food services (1.4%) sales.
• Food retailing and household goods retailing sales increased by 0.3% and 0.6%, respectively.
• However, department store and clothing, footwear, & personal accessory retail sales declined by 0.5% and 0.6%, respectively.

Head of retail statistics at ABS Ben Dorber said,

“This latest rise reflected some resilience in spending with consumers taking advantage of larger than usual promotional activity and sales events for May.”

The larger-than-expected rise in retail sales would normally open the door to further RBA moves to curb spending and tame inflation. However, Australian inflation numbers from Tuesday suggest today’s retail sales figures will have a limited impact on sentiment toward RBA monetary policy.

AUD/USD Reaction to Australian Retail Sales

Ahead of the retail sales numbers, the AUD/USD fell to an early low of $0.65954 before rising to a pre-stat high of $0.66178.

However, in response to the retail sales figures, the Aussie slipped to a post-stat low of $0.66131 before rising to a high of $0.66256.

This morning, the AUD/USD was up 0.36% to $0.66229.

Next Up

Ahead of the US session, Fed Chair Powell will be speaking again. However, the Fed Chair must deviate from previous scripts to move the dial. A reiteration of two consecutive rate hikes on the table will likely have a limited impact on market risk sentiment ahead of tomorrow’s US Core PCE Price Index numbers.

Looking at the US session, Q4 GDP and initial jobless claims will also need consideration. After Fed Chair Powell’s hawkish comments on Wednesday, sentiment toward Fed monetary policy turned more hawkish.

According to the CME FedWatch Tool, the probability of a 25-basis point July Fed rate hike stood at 81.8% versus 76.9% on Tuesday. Significantly, the chances of the Fed lifting rates to 5.75% in September stood at 16.4%, up from 15.4% on Tuesday, leaving monetary policy divergence in favor of the greenback.