AU retail sales preview and what comes next for the AUD/USD

[MongiIG]

Ahead of the Australian Retail Sales data release, the market is expecting a fall of -0.1% in February following a 1.9% rise in January.

 

Source: Bloomberg

 

Forex Retail AUD/USD United States dollar Inflation Australian dollar

 Tony Sycamore | Market Analyst, Australia | Publication date: Monday 27 March 2023 

Retail sales release date

Retail trade data will be released on Tuesday, 28th of March at 11:30am AEDT.

March board meeting

After a crazy week where the global banking crisis took centre stage, there is a renewed focus on Australian macro data ahead of next week’s RBA Board Meeting.

Recent events in the banking sector, which make for a more uncertain outlook, have made the RBA’s dovish shift and discussion of a pause at its March Board meeting timelier.

The minutes from the March Board meeting noted that the Board agreed it would be appropriate to pause "at some point" to assess the effects of prior rate hikes.

As part of its considerations, it would closely watch incoming employment, inflation, business surveys and retail sales data. Members “agreed that upcoming releases on employment, inflation, retail trade and business surveys would provide important additional information, as would developments in the global economy.”

Confusing the picture, employment data released in mid-March was stronger than expected. However, business and consumer confidence were soft and this elevates the importance of the release of retail sales for February tomorrow.

What is expected?

The market is looking for a fall of -0.1% in February following a 1.9% rise in January. There is a wide range of estimates from -1.2% to +0.8%, reflecting the volatility of this series.

Less we forget, retail sales fell by 3.9% in December, its largest monthly fall since August 2020. However, that fall was attributed to spending being brought forward to take advantage of Black Friday and cyber-Monday sales.

 

Source: Trading Economics

While an RBA pause in April would appear more likely if retail sales and the monthly CPI indicator released on Wednesday come in at or lower than expected this week, the Australian interest rate market isn’t waiting for confirmation. It is now pricing in the very small chance of a rate cut at next week’s Board Meeting, with a full rate cut priced by October.

What does it mean for the AUD/USD?

The AUD/USD finished lower last week at .6645 (-0.84%) on risk aversion flows, a fall in the price of iron ore and after rejecting the resistance at .6760/85 coming from the 200-day moving average and the highs of March.

While below resistance at .6760/85, the risks remain to the downside for the AUD/USD, with .6520/00 as the next downside target. Aware that should the AUD/USD see a sustained move above resistance at .6560/85, it would negate the bearish bias and allow a more constructive picture to emerge.

AUD/USD daily chart
 

 

Source: TradingView

1. TradingView: the figures stated are as of March 27th, 2023. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.