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Aussie traders shrugged off the RBA’s jawboning and growth forecast adjustments against Australia’s strong retail sales data.

  • Japan’s average cash earnings (y/y) down by 0.4% vs. 0.5% expected, 0.6% previous
  • AU retail sales up by 0.3% vs. 0.2% expected, 0.6% previous
  • RBA cuts growth forecasts for 2017
  • All eyes on the NFP report

Major Events/Reports:

RBA cuts growth forecasts

Earlier today the Reserve Bank of Australia (RBA) printed its quarterly statement of monetary policy. In a nutshell, Lowe and his team are NOT happy with a strong currency.

The central bank cut its growth forecasts from 3.00% to 2.50% by December 2017 and 3.0% from 3.25% by June 2018. It also retained its 3.25% call for December 2018 and upgraded June 2019’s forecasts from 3.25% to 3.50%.

The RBA is still generally optimistic, as higher commodity prices, low unemployment, and strong business investment growth are expected to boost economic activity.

Apparently, the biggest risks to its relatively upbeat outlook are flat wage growth extending into the future and households holding back from spending because of their debts.

The central bank is also upbeat on inflation and employment, believing that a declining capacity in the labour market would lead to faster wage growth and more inflationary pressures.

The RBA isn’t feeling as fly over the strong Aussie though. As in its monetary policy decision earlier this week, the central bank warned that “[f]urther exchange rate appreciation would tend to generate a slower pickup in economic activity and inflation than currently forecast.”

Unfortunately for the RBA, Aussie traders mostly shrugged off the jawboning in favor of pricing in a strong retail sales report. Which brings me to my next point:

Australia’s retail sales

Looks like blokes and sheilas were in the mood to shop last June!

Data from Australian Bureau of Statistics earlier today saw retail sales rising by 0.3% in June after gaining 0.6% in May. Not only is this faster than the expected 0.2% uptick, but it also marks the third consecutive month of gains for the report.

Sales improved by 0.4% in trend terms while sales rose by 1.5% in Q2 2017 on a one-two punch of aggressive discounting as well as better weather from the previous quarter.

A closer look tells us that household goods (+0.9%) gained the most, but all other major components also showed improvement.

All eyes on the NFP report

Market price action was mostly subdued as traders stayed in the sidelines ahead of Uncle Sam’s much-awaited NFP report.

In addition, risk sentiment remained weak as Japanese traders worried over the impact of a strong currency on future earnings.

  • Nikkei is down by 0.34% to 19,961.00
  • Australia’s A SX 200 is down by 0.35% to 5,715.10
  • Hang Seng is up by 0.13% to 27,568.00 and
  • Shanghai index is down by 0.03% to 11,800.25.

Major Market Mover(s):


RBA’s jawboning got nothing on Australia’s surprisingly strong retail sales release!

AUD/USD is up by 18 pips (+0.23%) to .7967, AUD/JPY is up by 32 pips (+0.37%) to 87.71, and AUD/NZD is up by 39 pips (+0.37%) to 1.0719.

Watch Out For:

  • 6:00 am GMT: German factory orders (0.6% expected, 1.1% previous)
  • 8:00 am GMT: Italy’s retail sales (0.1% expected vs. -0.1% previous)
  • 8:10 am GMT: Euro Zone retail PMI (53.2 previous)