The Takeaway: Australian retail sales decreased by 0.4 percent (MoM) in March -> Weaker domestic demand increased bets for a rate cut on May 7 -> AUD declined.
A surprising weaker consumer retail sales data for March increased bets for a rate cut on May 7, thereby sending the Australian dollar lower against all major counterparts on Monday Asian session. The Australian retail sales decreased by 0.4 percent (MoM) in March, compared to 1.3 percent in February, came in well shy of estimate set for 0.1 percent, according to the Australia’s Bureau of Statistics.
The slowdown in the pace of service-sector activity combined with the lower ANZ job advertisements figures, together pointed to a slowing consumer spending, which reduced upward pressure on prices and inflation. More importantly, amid the recent signs of a slowdown in China’s economic growth, this report could reinforce the case of a rate cut by theReserve Bank of Australia (RBA) rate decision that is set to release on May 7. In fact, the market is pricing in a 51 percent probability that RBA will cut rate by 25 bps tomorrow.
After the release, the Australian dollar declined against all counterparts as traders worried that the high yield profile of the Aussie will be affected by a rate cut. The Aussie slipped nearly 25 pips against the US dollar. At the time of writing, the AUD/USD is trading at 1.02792.
AUD/USD 1 Minute Chart
Chart Created by Robin Leung using Marketscope 2.0