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

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.

USDJPY 30 Minute Chart 290224