Australian dollar slides on poor retail data

The Aussie dollar is sharply lower today on news of weaker-than-expected retail sales, which has kept the door open for a rate cut.

The Australian dollar is sharply lower today on news of weaker-than-expected retail sales for May, which has kept the door open to an interest-rate cut later this year.

Retail sales rose by 0.3 per cent in May from April, the Australian Bureau of Statistics said today, weaker than the 0.6 per cent increase economists had been expecting.

The small rise was confined mainly to New South Wales, with retail sales in all other major states remaining relatively flat. Sales for April were revised downwards to show a 0.1 per cent drop, compared with the flat result originally reported.

Despite record-low interest rates, consumer spending across the economy remained restrained overall, economists said.

“The Reserve Bank of Australia would have been a little surprised and probably disappointed with the soft retail sales data for May,” said Su-Lin Ong, economist at RBC Capital Markets.

“Today’s data remain consistent with a mild easing bias,” she added.

The RBA will meet on Tuesday with markets betting the key rate will be kept unchanged at 2 per cent.

JPMorgan chief economist said he was expecting little news to emerge from the policy meeting. The RBA last lowered rates in May and February.

“We expect no change to the cash rate or material changes to the tone of the (RBA’s) commentary,” said Stephen Walters, chief economist, Australia.

“Our expectation is that the RBA is in a holding pattern as officials watch developments domestically and offshore, including the troubling events in Europe.”

At 4:48pm the Australian dollar was trading at US75.89c, compared with US76.35c late yesterday.