Australian Retail Sales printed better than expected 0.7% gain versus 0.3% forecast suggesting that the economic activity in the land Down Under remains hot.
Â· Australian Dollar: RBA stays pat but retail sales print hot
Â· Japanese Yen: lifted above 116 off carry flows from AUD/JPY
Â· Euro: wanders aimlessly as data show no surprises
Â· Pound: Hovers around 2.0400 as inflation news muted
Â· USD: ADP on tap
Australian Retail Sales printed better than expected 0.7% gain versus 0.3% forecast suggesting that the economic activity in the land Down Under remains hot. Australian consumers shrugged off the credit concerns that affected much of the rest of the G-10 universe and continued to spend lavishly as soaring global demand for the countryâ€™s vast commodity resources pushed employment to record highs and increased wages.
Tonightâ€™s news raised speculation of another possible rate hike in the near future, although for the time being, the RBA preferred to remain stationary, citing the recent upheaval in global capital markets as their reason for their caution. Still, the strong spending trends which saw imports of capital goods surge 14% in August, suggest that the Australian Central Bank will hike before the year end if there is no additional turmoil in the credit markets.
The Aussie ran through the 8900 figure in the aftermath of the news, but backed off the highs by early European trade. Most of the order flow, however, was directed towards the carry trade as AUDJPY catapulted above 103.00 lifting USDJPY above 116.00 as a result. The yen was also weighed down by commentary from ex-BOJ member Hirano who predicted that the Japanese central bank will remain on the sidelines for the rest of the year, given the slowdown in the US economy.
Meanwhile the EURUSD continued to mark time as traders prepared themselves for the ECB meeting on Thursday and US NFP numbers on Friday. Overnight economic data offered little guidance with the final PMI reading essentially meeting estimates at 54.7 while EZ Retail Sales printed a bit softer at 0.1% versus 0.4% forecast. The EZ data was dragged down by a 2.9% decline in German Retail Sales as the regions largest economy continues to struggle with an increase in VAT enacted at the start of this year. Overall consumption trends in the worldâ€™s second largest economy remain muted creating little if any pricing pressure and providing yet another reason for the ECB to hold rates steady rather than raise them.