Retail Sales Boosts the AUD, with USD on the Defensive ahead of NFP Numbers

Earlier in the Day:

Material economic data released through the Asian session this morning was on the lighter side, limited to February retail sales and building approval figures out of Australia and China’s March Caixin Service PMI.

For the Aussie Dollar, the data was mixed this morning, though the more influential of the stats was a positive for the Aussie Dollar.

February building approvals fell by 6.2%, which was a larger than forecasted 4.8% decline, to partially reverse January’s 17.2% surge. The slide in approvals was attributed to a 16.4% decline in private sector dwellings excluding houses, which was in contrast to the 1.9% rise in approvals for private sector houses, as reported by the ABS.

Retail sales rose by 0.6% in February, coming in ahead of a forecasted 0.4% rise and January 0.2% rise according to figures released by the ABS.

All industries contributed to the uptick in sales, with household goods retailing up 1.1%, food retailing up 0.3%, café’s restaurants and takeaways seeing a 0.7% rise in sales, clothing footwear and personal accessories up 1.1%. Following 3 consecutive months of falling sales, department store sales also increased, up 1.5% in February.

In similar trend to other developed economies, on-line retail sales continued to eat into the more traditional bricks and mortar sales, with on-line sales accounting for 5.1% of total retail turnover in February, compared with 3.6% of total retail turnover in February of last year.

The Aussie Dollar moved from $0.76833 to $0.76931 upon release of the figures, the sales figures coming in the wake of Tuesday’s RBA Statement that had continued to raise concerns over an uncertain outlook for household consumption.

Out of China, the Caixin Services PMI disappointed, the PMI falling from 54.2 to 52.3, coming up short of a forecasted 54.5.

The softer numbers came off the back of a slower increase in new order volumes, a slower pace of hiring and only a slight increase in outstanding business. Input prices were on the rise in March, though the rate of inflation was the slowest for 4-months.

Following disappointing manufacturing figures earlier in the week, the composite PMI indicated that total Chinese business activity expanded at the slowest pace in 4-months, with the Composite Output index falling from 53.3 to just 51.8 to indicate only a modest pace of expansion at the end of the 1^st quarter.

The Aussie Dollar, taken as a proxy, moved from $0.76931 to $0.77015 upon release of the figures, before rising to $0.7707 at the time of writing, up 0.29% for the morning, the better than expected retail sales figures continuing to drive the Aussie Dollar through the Asian session.

Elsewhere, the Japanese Yen was up 0.08% to ¥106.53 against the Dollar, with trade chatter between the U.S and China continuing to support appetite for the Yen

The Kiwi Dollar was also on the move, up 0.44% to $0.7288, unaffected by the disappointing stats out of China this week or the trade chatter through the morning, the upside coming after the release of another fall in GlobalDairyTrade Price figures on Tuesday, the Kiwi Dollar’s hold in spite of the weak figures, driving the Kiwi Dollar through the session on technicals.

Adding to the upside for the Kiwi Dollar this morning would have been the better than expected consumer confidence figures, with consumer confidence rising from 127.7 to 128.0, a lack of stats leaving the markets to respond to minor data at the start of the day.

In the equity markets, it was a choppy day, with the Hang Seng giving up early gains to move into the red at the time of writing, while the Nikkei and CSI300 were up 0.08% and 0.90% respectively. The ASX200 moved into positive territory in the final hour of trading, up 0.14%.

The Day Ahead:

For the EUR, after a mixed bag of data on Tuesday, focus shifts to the Eurozone’s prelim March inflation figures and February’s Eurozone unemployment rate.

Core inflation is forecasted to pick up from February’s 1.0% to 1.1% in March, year-on-year, with headline inflation forecasted to rise to 1.4%. While the ECB President raised concerns over near-term inflation, the uptick would provide some support for the EUR, though baseline inflation continues to sit well below the ECB’s close to 2% objective.

The Eurozone’s unemployment rate is forecasted to fall from 8.6% to 8.5%, which would provide some further support, though until labour market conditions tighten further, wage growth will likely continue to remain tepid, providing little support to inflation from a consumption perspective.

At the time of writing, the EUR was up 0.07% to $1.2279, with today’s inflation figures and trade tariff chatter’s influence on market risk appetite being the key drivers through the day.

For the Pound, economic data out of the UK today is limited to this morning’s March construction PMI. Following a slight uptick in manufacturing sector activity in March, according to the PMI figures released yesterday, positive numbers this morning would fuel further speculation of a BoE rate hike next month, though much will depend upon tomorrow’s service sector PMI and the next set of inflation and employment numbers.

Outside of the data, Brexit will continue to be a factor, with the news wires inundated with chatter on trade and the lack of agreement in the UK government on how to proceed.

At the time of writing, the Pound was up 0.19% to $1.4084, the negative chatter on Brexit seemingly falling on deaf ears, as the Pound looks to make a move back through to $1.42 levels on the back of positive economic data.

Across the Pond, after a quiet day on the economic calendar on Tuesday, stats out of the U.S this afternoon include March’s ADP nonfarm employment change and service sector PMI numbers, together with February’s factory order figures. Key drivers through the afternoon will be the ADP numbers, which will need to hold above 200k to support the Dollar, together with the market’s preferred ISM non-manufacturing PMI number for March.

Following some disappointing manufacturing PMI numbers earlier in the week, softer service sector PMI figures would certainly add further downward pressure on the Dollar and raise questions over whether the economy is beginning to falter just as the U.S administration looks to kick start a trade war with China.

Within the PMI survey, greater attention will likely be paid towards wholesale output price pressures, labour costs and new orders.

At the time of writing, the Dollar Spot Index was down 0.13% to 90.084, with the Dollar also expected to be influenced by noise from the Oval Office and Beijing as trade war chatter heats up, while FOMC members Bullard and Mester are also scheduled to speak through the day.