Australian Dollar Falls Against US Peer on Weak Retail Data

The Australian dollar declined against its US counterpart on Thursday after a fresh report that showed that Australian retail sales fell behind expectations for the second month in a row. The Australian dollar also dropped against other major peers as expectations for higher interest rates decreased following today’s data.

The Australian Bureau of Statistics stated in a release today that retail sales lost 0.6% in August on a seasonally adjusted basis, after losing 0.2% in July. The data disappointed expectations of a 0.3% gain and revealed a decline in consumer spending, which accounts for the majority of the overall economic activity. The 0.8% drop during July and August was the biggest decline in two months since October 2010.

The biggest drop was in the restaurants and food services sector, which lost 1.3%, followed by decline of 1.0% in sales of household goods. Food retail sales and clothes and footwear sales also fell by 0.6% and 0.2%, respectively. On the other hand, department store sales increased 0.7%.

The decrease in retail sales raised investors’ concerns that the Reserve Bank of Australia will not increase interest rates any time soon. The central bank previously stated that the growing debt in Australia’s property sector may weigh on consumer spending and retail sales.

Analysts expect that the central bank may keep its monetary policy unchanged this year and the next due to the lackluster economic outlook. Investors now bet that the next interest rate increase may happen as late as October 2018, versus last week’s expectations of a raise in August of the same year.

Another release from Australia’s official statistical office showed that the country had 989 million Australian dollars of goods and services trade surplus in August. The surplus was up from 806 million Australian dollars in July. However, the surplus failed to support the nation’s currency as most of the exports gain was in volatile commodity shipments.

AUD/USD dropped to 0.7815 as of 11:20 GMT on Thursday after touching 0.7813 as of 11:05 GMT, the pair’s lowest level since October 3. AUD/USD began trading today at 0.7859.

EUR/AUD traded at 1.5021 after rising to 1.5044 at 10:20 GMT, which was also the highest level since October 3. EUR/AUD was at 1.4952 when trading started today.

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