The Australian Dollar picked up off session lows of US$0.6418 after US retail sales revealed the biggest decline ever.
At 14:00 UTC, AUD/USD is trading -0.3% at US$0.6448. This is approximately mid-way between the daily traded range of US$0.6417 – US$0.6479. The pair is on track to decline -1.4% across the week, after 5 straight weeks of gains.
Upbeat Chinese Data Lifted Aussie Dollar
The Australian Dollar had started the session on the front foot following some bright spots in Chinese data, which overshadowed threats from President Trump to cut ties with China.
Chinese industrial production jumped 3.9% month on month in April, well above the 1.5% increase forecast. The figures boosted optimism that the world’s second largest economy was progressing well in restarting industry after the covid-19 lockdown.
Chinese retail sales were slightly more disappointing, down -7.5% against an expected -7% drop. However, this was a substantial improvement from -15% decline in March.
China is Australia’s largest trading partner. The Australian Dollar is often considered a liquid proxy for China.
There is no more high impacting Australian data due to be released this week. Investors will now look ahead to the release of the minutes from the latest Reserve Bank of Australia monetary policy meeting on Tuesday.
US Retail Sales -16.4%
The US Dollar dropped sharply lower after data revealed that lockdowns across the US led to the deepest monthly fall in retail sales on record. According to the Consensus Bureau, retail sales declined -16.4% in April, after an -8.7% fall in March. The drop was significantly worse than the 12% fall that analysts had pencilled in.
The retail sales are the latest piece of hard data to show the full impact of the lockdown measures put in place to slow the spread of coronavirus.
Investors will now look ahead to US consumer confidence data. Analysts are predicting consumer morale fell to a 10 year low in May as investors fret over job security and the health of the broader economy.
Consumer confidence is a closely watched indicator because consumers drive the US economy. Therefore, the reading can offer some guidance as to whether this will be a slow road to recovery or a quick bounce back. Analysts are expecting consumer confidence to drop to 68 in May, as it falls further from March’s 71 reading.
