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Australian dollar on brink of six-year low after retail sales data disappoints

Date

Stephen Cauchi

The Australian dollar was flirting with six-year lows on Friday afternoon following the release of worse-than-expected retail sales data.

The Australian dollar dropped to US75.67? on Friday afternoon.

The Australian dollar dropped to US75.67ยข on Friday afternoon.

The Australian dollar was flirting with six-year lows in the wake of worse than expected retail sales data. And the currency expected to breach this floor if a no vote in the Greek economic referendum on Sunday is recorded.

Official retail sales data released on Friday showed growth of 0.3 per cent in May. That was well below expectations of a 0.5 per cent rise.

It was fairly disappointing figures and they've sparked speculation about a rate cut at next month's Reserve Bank meeting.  

Matt Simpson, ThinkForex

Hopes of stronger retail activity stemmed partly due to stimulatory policy in the federal budget.

The dollar fell 0.8¢ in the wake of the announcement before bottoming at US75.67¢ just after midday AEST. This level is just above the six-year low of US75.32¢, reached on April 2.

It had recovered slightly and was trading at US75.88¢ late on Friday afternoon.

"It was fairly disappointing figures and they've sparked speculation about a rate cut at next month's Reserve Bank meeting," said ThinkForex markets analyst Matt Simpson. 

"I don't think it will, however, because I'm of the view that the Reserve Bank are assuming that the Federal Reserve will act first, which will take the pressure off.

"The problem will occur when the Fed turn around and start delaying that further. I don't think they're going to raise rates this year and that's going to put pressure later in the year for the Reserve Bank to cut rates."

Mr Simpson said that a yes vote in the Greek referendum on Sunday would push the Australian dollar higher and a no vote would push it lower.

"If you keep Greece in the euro zone, that will see the euro rebound as well, make the US dollar weaker and support the Aussie." 

Economist Stephen Walters of JPMorgan described the retail sales figures "disappointing".

"Australian consumer spending failed to bounce back in May, despite what should have been support from the Reserve Bank's early month rate cut and the mid-month federal budget, which included measures aimed at lifting investment by small businesses," he said.  

That was also the view of St. George economist Janu Chan.

"Although not far from our expectations, it was disappointing given the spending boost from rate cut from the RBA and some relief after the federal budget was announced. Further, the modest growth in May followed a small contraction in April."

ANZ analyst Katie Hill said that the "disappointing May retail sales print, provides further evidence that consumer spending has failed to pick up in 2015.

"While the recent lift in confidence and Commonwealth budget measures may still boost retail in the near term, anaemic wages growth continues to present a formidable headwind to any sustained uplift in consumer spending."

Commsec economist Craig James was more positive. "Retail sales are still up 4.7 per cent over the year, far above the five-year average of 3.6 per cent," he said. 

"And the data shows that the larger retailers are doing well, with sales up 5.3 per cent over the year."

31 comments so far

  • I wrote that this would happen in response to the article only this morning from 24 econmists saying it would stabilize.

    It wont.

    IT will tank completely.

    Food prices will rise thanks to 1.4 billion being added to the demand from China through the foolish free trade agreement.

    The chinese stock market is an insane casino of rigged untransparent fixed data which will have to collapse as all rigged markets do

    House prices will soar due to the Chinese buying us out while the bureaucrats try to justify the sell off with uninformed short sighted "reports"

    And our corrupt politicians (Hockey cant sue me) will take some back handers to facilitate the process.

    Future is dire.

    Enjoy the wonderful fresh food for the next few years after which we will be a vassal state of despotic china.

    Commenter
    Jason
    Location
    Canberra
    Date and time
    Fri Jul 03 06:49:59 UTC 2015
    • Meh, plenty of water underground so we can tap it and grow things for years to come, regardless of what the idiot greens say.

      But, the fact remains that the Chinese will pay more for Australian produce than Australians will so yeah, city slickers can expect a price rise in coming years.

      Why sell for the lowest price when the Chinese will pay more?

      # And as for all your doom & gloom misery I reckon you've been watching the abc's climate change hysteria and associated climate change misery too much and it's influencing you. Just do what most Aussies do and turn it off- you'll feel happier and alive without the dreary socialist group think ideology.

      Commenter
      Alex
      Location
      Finley
      Date and time
      Fri Jul 03 07:34:29 UTC 2015
    • Stop worrying Alex and others.
      We've got the LNP running Australia and they're superior economic managers we're told. (Who signed the FTA with China then? Who sells up to the Chinese?)
      But if anything should go awry, of course it will be totally the fault of the Chinese, the Greens, socialists, the ABC, nasty city slickers and anybody else you don't like won't it. Those ever so trustworthy Americans manipulating Wall Street would never get up to any mischief concerning currency exchange rates now would they! No never.
      Furthermore, all those educated scientists know nothing about climate matters compared to folk including Jones, Bolt and Hadley, do they Alex.

      Commenter
      Sea Hawk
      Date and time
      Fri Jul 03 11:13:42 UTC 2015
    • I live happily now in Tasmania .

      A low dollar suit us nicely.. about 60 cents will do.

      Your next overseas trip will be to here !

      Commenter
      Ex Qlder
      Date and time
      Sat Jul 04 00:09:01 UTC 2015
  • I think very soon it won't be worth 2/-

    Commenter
    Dingos Breakfast
    Date and time
    Fri Jul 03 07:09:07 UTC 2015
    • I know I'm not an economist - I am an English language teacher.

      "The currency was trading at US75.88¢ on Friday afternoon after bottoming at US75.67¢ just after midday AEST. This level is just above the six-year low of US75.32¢, reached on April 2."

      Doesn't this mean that the low of 2 April remains the low point? Wasn't 2 April three months and one day ago or 92 days ago? How does the six years years get into the discussion? Before 2 April was the previous low six years ago?

      Does economics measure time differently from the rest of us?

      Commenter
      MJM
      Date and time
      Fri Jul 03 07:09:15 UTC 2015
      • We're talking about economists here.....

        There are the people that make so many conflictingly wild prediction month on month ranging from the wildly optimistic to the direly pessimistic in the space of 6 months, that all they have to do is pull one of their suggestions out (give or take a month) two years later and claim they were right.

        In the good old days before the immediate communications we have today, there was a basis for their study. Now, major financial situations (stocks) can be manipulated in an instant from within a shareholders meeting via phone/internet. What hope does an average shareholder have?

        The have correctly guessed 16 of the last 2 crashes, and 14 of the last 3 booms we have had on the stock market.

        Commenter
        The truth
        Date and time
        Fri Jul 03 09:44:28 UTC 2015
    • Confidence will never return under Abbott and his stooges. They play down the economy to weasel into office, and then proceed by sheer bastardry to deprive those people who spend the most for essentials, leaving them nothing for the extras. Simple economics really, but with the LNP mired in the past, and using the word "CUT" in every other sentence, even a simpleton can work out that confidence will not return until the LNP is voted out.

      Commenter
      TareeDawg
      Date and time
      Fri Jul 03 08:04:28 UTC 2015
      • Yay! The wait is nearly over! The left can squabble over the inevitable cuts and the right can be convinced to move to their "greener" pastures!

        Commenter
        Payback
        Date and time
        Fri Jul 03 08:11:57 UTC 2015
        • The iron ore boom forced the Australian dollar (AUD) up to $1.03 V the US dollar (USD). Because of the high dollar our manufacturers could not compete internationally so they closed down or moved their operations overseas. .
          The AUD is now down to 75.8c to the USD but it is too late for Ford, Holden and Toyota.
          When Holland found large supplies of offshore oil/gas their currency peaked and their manufactures became uncompetitive too. Economists have a special name for it - google "Dutch disease"
          I am convinced our iron ore industry is an absolute curse

          Commenter
          Alan
          Location
          Perth
          Date and time
          Fri Jul 03 08:32:44 UTC 2015

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