Aussie dollar off 12-week high vs greenback as retail sales data disappoints, NZD up

Retail sales in Australia unexpectedly fell 0.1% month-on-month in December when analysts had been expecting a 0.3% gain.

Australian dollar Reuters

The Australian dollar has fallen from a 12-week high against the US currency on Monday (Feb 6) as disappointing retail sales data dampened the hawkish sentiment generated by last week's surprise trade data while the New Zealand unit continued to rise ahead of Tuesday's dairy auctions.

AUD/USD dropped to 0.7658 from the previous close of 0.7683, which was a near three-month high for the Aussie. Against the New Zealand dollar, it was down to 1.0462 from the previous close of 1.0502.

Retail sales in Australia unexpectedly fell 0.1% month-on-month in December when analysts had been expecting a 0.3% gain and compared to a downwardly revised 0.1% rise in November, the Australian Bureau of Statistics said on Monday.

The Bureau had said on Thursday (Feb 2) said that the trade balance of the country was a surplus of a record A$3.51 billion in December, way above market expectations of A$2.2 billion. It made a 72% jump from the November surplus. The data had pushed the Aussie dollar to a 11-week high with a more than 1% gain on the day.

Mixed Cues

Two other data releases on Monday, however, were hawkish for the Aussie.

As per an ANZ study, job advertisements in Australia jumped 4.4% month-on-month to 167,163 in January, rebounding from 2.2% fall in December.

"The bounce in ANZ job ads, along with modest increases in other leading indicators, lends support to our view that although momentum in the labour market has slowed, it remains strong enough to underpin a gradual decline in the unemployment rate this year, said ANZ senior economist Felicity Emmett.

The next was an inflation gauge index released by TD-MI, which was up 0.6% month-on-month in January, faster than the 0.5% rise in December.

The Reserve Bank of Australia had slashed the benchmark interest rate twice last year to counter low inflation in the country.

Some analysts estimate the probability of another RBA cut by May as 14% or so, while some even predict a further hike by the end of 2017, given the overall health of the economy.

Commodity Prices

Being commodity exports the major driver of the Australian economy, price trends of commodities has a direct impact on the Aussie dollar.

According to the RBA, the commodity prices are keeping the rising trend, helping the AUD-bullish sentiment. As per the preliminary estimates published on Feb 1, the commodity price index has increased by 5.3% in SDR terms and by 4.1% in AUD terms, led by the prices of iron ore and coking coal. It followed a 8.8% rise in December.

New Zealand Dollar

The New Zealand dollar rose to 0.7328, up more than 0.2% on the day and holding near the 12-week high of 0.7351 hit on 31 Jan.

For kiwi traders, the result of the global dairy auction late on Tuesday will be crucial as 7% of New Zealand's GDP comes from the dairy sector. Prices had edged up slightly in the last auction following two consecutive declines.