Australian retail sales tumble

9 May, 2017

Our prop desk is making good progress with a long GBP/JPY positions we saw opened yesterday, whilst other long Sterling positions from late April continue to make gains, too. A short gold position we saw closed out yesterday also resulted in a healthy slug of profit.

It’s another relatively quiet day in terms of what we have slated to appear on the economic agenda although geopolitical affairs will once again take a step forward. Future relationships between the UK and France will be closely followed as Emmanuel Macron moves towards his inauguration in becoming the French President and any signs that he intends to make the Brexit process more complicated could take a swipe at the pound.

Retail sales from Australia for March were published during the Asian session and the notably lower than expected print showing contraction of 0.1% against a forecast expansion of 0.2% left the Aussie dollar reeling.ВВВВВ AUD/USDВВВВВ is now pushing towards lows for the year and with the national budget due to be proposed tonight, the downside pressures could well be exacerbated. Australian government borrowing is on the up, so anything that looks too exuberant in terns of spending plans could see the Aussie dollar at least consolidate around these levels if indeed it doesn’t push lower still.

The British Retail Consortium sales monitor print released overnight charged notably higher for April, but markets have brushed off the news with the late timing of Easter being seen as distorting the picture. Rising inflation and a focus on essential spending in supermarkets and petrol stations was also in evidence, which explains why there was no marked reaction in terms of the pound’s performance overnight, although with the currency sitting close to recent highs against a number of major crosses, it’s perhaps no surprise there’s a degree of inertia being seen here.

USD/JPYВВВВВ continues to march higher, with IMF warnings over the outlook for Asia-Pacific economies taking a toll on the regional outlook. The pair is now trading at two month highs and an although faltering Japanese equities may be providing some resistance, a better than expected US wholesale inventory reading for March – which is due for release at 2pm GMT – could deliver another leg higher for the pair.

We have Chinese CPI for April set to be released at 1.30am GMT tomorrow and a meaningful print here could provide a degree of respite for that beaten down Aussie dollar, which as noted appears to be drifting into oversold territory. Granted the budget from Canberra will dominate, but in the absence of any contention here, some read across may be seen.

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