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Australian Dollar Halts Slide After Upbeat Retail Sales And Trade Data

Australian Dollar Halts Slide After Upbeat Retail Sales And Trade Data
8/1/2012 11:48 PM ET

The Australian dollar halted its slide against other major currencies in Asian trading on Thursday following the release of the nation's upbeat retail sales and trade data for June.

Data from the Australian Bureau of Statistics showed that retail sales were up a seasonally adjusted 1.0 percent on month in June, standing at A$21.584 billion. That topped forecasts for an increase of 0.7 percent on month after adding an upwardly revised 0.8 percent in May.

For the second quarter, retail sales climbed a seasonally adjusted 1.4 percent on quarter to A$62.562 billion. That also beat expectations for a quarterly increase of 0.9 percent following the 1.8 percent gain in the previous three months.

Another report from ABS showed that Australia posted a seasonally adjusted merchandise trade surplus of A$9 million in June, beating forecasts for a deficit of A$375 million after posting a revised shortfall of A$313 million in May.

The Australian dollar declined in late New York session on Wednesday as the Federal Reserve refrained from revealing any new stimulus measures despite offering a sobering assessment of the U.S economy. The Fed noted that economic activity decelerated over the first half of the year and predicted that economic growth would remain moderate over the coming quarters.

The central bank kept interest rates unchanged at near-zero levels and reiterated that rates are likely to remain at exceptionally low levels at least through late 2014. While the Fed also said it will closely monitor incoming data and will provide additional accommodation as needed, it did not offer any new measures following last month's extension of Operation Twist.

Though the Australian dollar recovered slightly in response to upbeat domestic economic data, caution is likely ahead of policy decision later today from the European Central Bank and the Bank of England.

After hitting a 6-day low of 1.0438 against the US dollar at 8:40 pm ET, the Australian dollar rebounded. As of now, the aussie-greenback pair is trading at 1.0481 with 1.050 seen as the next upside target level. The pair ended yesterday's trading at 1.0459.

The Australian dollar is currently trading at 82.30 against the yen and 1.1685 against the euro, compared to lows of 81.91 and 1.1715, hit respectively at 8:40 pm ET. If the aussie gains further, it will target 82.5 against the yen and 1.166 against the euro. At yesterday's close, the aussie was quoted at 1.1696 against the euro and 82.05 against the yen.

The Australian dollar that touched a 6-day low of 1.0500 against the Canadian dollar at 8:40 pm ET bounced back thereafter. The aussie-loonie pair is now worth 1.0531 and the next upside target level for the Australian currency is seen at 1.055. The pair closed yesterday's trading at 1.0519.

Against the New Zealand dollar, the Australian dollar is presently trading at 1.2955, up from a 6-day low of 1.2926 hit at 8:05 pm ET. If the aussie-kiwi pair strengthens further, it will test resistance around the 1.30 level. The pair was quoted at 1.2946 at yesterday's close.

Looking ahead, Swiss retail sales for June and SVME PMI for July, Eurozone PPI for June and the U.K. construction PMI for July are slated for release in the European session.

The BoE and ECB are expected to announce their interest rate decisions at 7 am and 7:45 am ET, respectively. Though both banks are widely expected to retain their interest rates, ECB President Mario Draghi's regular post-decision press conference at 8.30 am ET will be closely watched.

Market participants are speculating about a wide variety of possible measures from the ECB after Mario Draghi last week fueled expectations that the central bank would adopt some bold measures to tackle the eurozone crisis.

Draghi pledged last Thursday that "Within our mandate, ECB is ready to do whatever it takes to defend the euro". And that will be enough, he added. Germany, France and Italy have also voiced their support of protecting the euro.

Yet, economists are doubtful that ECB would announce any drastic measures. "Any action to substantially tackle the debt crisis would come with a high risk of inviting political complacency and moral hazard," ING Bank Economist Carsten Brzeski said.

Across the Atlantic, the U.S. factory goods orders for June and the weekly jobless claims for the week ended July 28 are due for release in the New York morning session.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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