Australian shoppers continued to “do their part” in November, with retail trading up 7.3% in November, down from 3.9% in October and beating the 3.5% forecast. That makes it the biggest monthly increase after the pandemic and, if measured against the same period a year earlier, retail trade rose 5.8%.
If we take a look behind the headline figure, we note that clothing and department store purchases accounted for most of the spending spree, with clothing rising 38% (or 16.5% y/y ) and department store trade increasing 26% (or 2% y/y). Cafes and restaurants rose 9% in November (11%y/y) and only food retailing contracted, down just -2.5%m/m (or -0.4%y /at).
At this point, we can only assume that the December numbers will extend the run, which is ultimately a good thing for the growth numbers. That said, the RBA will likely remain as dovish as ever, but that was enough to see the AUD as the strongest major currency in Asia today, rising against all of its major peers.
Read our guide to the Australian dollar
AUD/USD is up around 0.5% at the time of writing, although it remains below the 0.72 handle. And while retail sales have given him extra spring in his step, we remain skeptical that he will extend those gains by much if the US CPI turns strong tomorrow. A strong inflation print is likely to be a proxy for 4 Fed hikes, the first being in March, and this will more than negate the positive flows in today’s retail numbers. Of course, if the US CPI disappoints (which is unlikely), then we have a bullish scenario for AUD/USD in the near term.
Technically, the AUD had a decent break of trend support and is now in a potential 3 wave correction against its downside move. We would prefer to blend in rallies towards or up to the 61.8% Fibonacci ratio / broken trend line and favor a retest of last week’s low, with the possibility of an extended run to 0 ,7100.
