Australian Dollar slides after weak Retail Sales report

The Australian dollar is down sharply and has fallen to a three-week low. In the European session, AUD/USD is trading at 0.6491, down 0.66%.

Australia’s Retail Sales rise 0.3%

Australia’s retail sales slipped in February to 0.3% m/m, a sharp drop from the 1.1% gain in January and shy of the market forecast of 0.4%. Retail sales were up 1.6% y/y, which is considered weak reading given Australia’s rapid population growth.

Retail sales would slipped to just a 0.1% gain but seven Taylor Swift shows in Melbourne and Sidney boosted spending on clothing, merchandise and dining out, according to the Australian Bureau of Statistics.

Consumer spending remains weak due to elevated interest rates and high inflation. The Reserve Bank of Australia left rates unchanged for a fourth straight time at the March meeting and consumers are feeling pessimistic about the economy, which has dampened consumer spending.

The markets are looking at a rate cut in August or September but the RBA is yet to rule out rate hikes, although the language of the RBA statement at the March meeting was a bit more dovish than at the previous meeting. This week’s inflation release didn’t provide much support for lowering rates, with February CPI remaining unchanged at 3.4% for a third straight month.

The RBA is wary about lowering rates before it is convinced that inflation will remain sustainable in the 2% to 3% target range and won’t rebound if rates are cut. The next meeting is on May 7th and the first-quarter inflation report, which will be released in late April, could have a major impact on the central bank’s rate decision.

AUD/USD technical

• AUD/USD is putting pressure on resistance at 0.6551. Above, there is resistance at 0.6598.

• There is support at 0.6467 and 0.6420.