The Australian dollar came under pressure today after weaker than expected local data raised expectations for a rate cut from the Reserve Bank of Australia in the coming months.
At 3,18pm, (GMT) the Aussie dollar was trading at US76.12 down from US76.27 in Friday’s close.
Official figures out from the Australian Bureau of Statistics showed retail sales declined -0.1 percent last month, well below analysts’ expectations for a figure of 0.3 percent and added more weight to the case for a rate cut from the RBA
Some say the disappointing figures are connected to the growing unemployment rate as Australian’s, fearful of losing their jobs begin to rein in spending.
This poses a dilemma for the RBA as less consumer spending will keep inflation below the central bank’s target with many seeing the only escape as being a rate cut in the not too distant future.
“The ongoing deceleration in annual retail sales coupled with the softer underlying details are obviously problematic for the RBA, and call into question whether or not the Australian economy can grow at a rate sufficient to get core inflation back to target.” noted Tom Kennedy, economist at JPMorgan
Also, keeping a lid on the Aussie dollar against its American counterpart was the release of the ISM manufacturing index from the US that hit the market at a solid 57.2 and help keeps the Fed on track to raise interest rates again in the next few months.
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