Retail Sales Impacting RBA and Bank of Japan in Asia Market News

Mar 01, 2024

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Highlights

The latest Australian retail sales data provides further justification for the RBA to contemplate extending the duration of holding interest rates.
Persistent Australian inflation and an increasing pattern in Australian consumer expenditure led to initial advantages for the AUD/USD.
Conversely, early setbacks were observed in Asian stock markets as investors took into account the upcoming release of US inflation figures.

Australian Retail Sales Report: Impact on RBA Rate Path

Following Australian inflation data earlier in the week, attention shifted to the retail sales report.

January Retail Sales Performance

Retail sales saw a rebound of 1.1% in January, following a 2.1% decline in December, slightly below economists' expectations of a 1.5% increase. Key highlights include:

Clothing and Personal Accessories: Increased by 2.4%.
Household Goods Retailing: Rose by 2.3%.
Department Stores and Other Retailing: Both saw a 1.7% increase.
Food Retailing: Declined by 0.1%.

Analysis by ABS

According to Ben Dorber, Head of Retail Statistics at ABS:

Despite the monthly rebound, trend turnover remained stagnant, signaling no growth.
Changes in spending patterns due to seasonal shifts around Black Friday were noted, driven by consumer responses to cost of living pressures.

Market Reaction

The Australian dollar initially dipped to $0.64906 but later surged to $0.65036 post-report. Conversely, the ASX 200 slid by 0.12% to $7,650.9, mirroring US market losses amid concerns about inflation and Federal Reserve policies impacting consumer demand.

AUDUSD 30 Minute Chart 290224

ASX200 30 Minute Chart 290224

USD/JPY Dynamics Pre-US Inflation Data

Amid apprehensions about US inflation figures, the USD/JPY faced downward pressure, dropping by 0.26% to 150.299.

Japanese Retail Sales Impact

Retail sales data from Japan supported expectations for a potential Bank of Japan policy pivot from negative rates. January witnessed a 0.8% month-on-month increase, following a 2.9% slump in December.

Positive retail sales trends could spur demand-driven inflation, potentially prompting the BoJ to reconsider negative rates.

Market Response

The weaker USD/JPY adversely affected the Nikkei, which declined by 0.33% during the morning session, reflecting market sentiment amid anticipation of US inflation data.