Australian retail sales show healthy bounce
We are getting interesting data from Australia right now; signs maybe that the consumer end of the market is at that indecisive phase at the end of a protracted slowdown. Retail sales data showed a 0.5% increase in activity in July. That was much better than expected and may have something to do with the inflation rate, which eased to 4.9% in July from 5.4% the previous month. So, on the one hand, lower inflation should reduce the pressure on the Reserve Bank of Australia when it comes to interest rate hikes but increasing retail activity will concern the RBA, food may wish to keep the pressure on to curb any excess retail activity building in the market. Interestingly, overnight data showed a drop in building approvals of 8.1% in the month of July and only a 0.4% rise in construction work in the second quarter of the year. Obviously, the construction data lags by two months but that drop in building approvals is worse than the June data and much worse than the market expectations. Australia’s central bank board has a dilemma on their hands. The GBP/AUD exchange rate has been trickling lower for the last week and is down to AUD 1.9505 this morning. That is still more than four cents higher than the rate at the start of the month but, as mentioned yesterday from the 7th to the 22nd of August this pair was trying to get to AUD 2.00 to the pound.
USD traders’ quandary over mixed data
Tuesday bought mixed data from the US. The house price index rose 3.1%. That is encouraging from a consumer perspective but it was a sizeable drop in job openings. That data has been trending lower since May 2022. We also had a consumer confidence index from the Conference Board which delivered an unexpected drop to 106.1, when the markets had been expecting an improvement to 116.0. That slide in consumer confidence is likely to be felt right across the US economy. We are expecting the pending home sales data, due for release this afternoon, to also be negative. However, the big news for the US markets is the release this afternoon of the Q2 economic growth data. The markets are expecting a slight improvement from the first quarter’s 2% growth to perhaps 2.4% in this provisional data for Q2. The GBP/USD exchange rate, which dropped from nearly $1.28 just over a week ago down below $1.26 at the end of last week, has bounced a little to $1.2640 this morning. Where this pair will be by the end of the day depends on the GDP data more than anything else.