AUDNZD climbs to near 1.0920 despite weaker Australian Retail Sales

• AUDNZD has jumped to near 1.0920 despite the Aussie Retail Sales drop to 0.2%.
• RBA’s November monetary policy statement claims short-term inflation expectations at 8%.
• Australia’s GDP projections have dropped to 2.0% and 1.4% for H1CY22 and H2CY22 respectively.

The AUDNZD pair has witnessed buying interest despite the release of weaker Australian Retail Sales data. The Australian Bureau of Statistics has reported the Retail Sales for the third quarter at 0.2%, lower than the expectations of 0.45 and the prior release of 1.4%.

A significant decline in retail demand despite soaring price pressures signals that consumer demand has remained extremely weak. Households’ real income has been squeezed due to subdued earnings and accelerating price growth.

Apart from Retail Sales, the Reserve Bank of Australia (RBA) has released a monetary policy statement, which indicates that the Aussie dollar could face sheer volatility.

The Gross Domestic Product (GDP) projections for the first half of CY2023 are landed at 2.0% and 1.4% for the second half. Also, short-term inflation expectations have increased to 8.0% amid price growth in the service sector.

This week, the RBA continued its 25 basis points (bps) rate hike regime despite a significant jump in the inflation rate. The historic surge in Australian inflationary pressures was expected to compel RBA Governor Philip Lowe to return to a 50 bps rate hike structure. However, RBA Governor preferred to continue on the path of achieving price stability without deteriorating the economic prospects.

It is worth noting that the inflation rate for the third quarter landed at 7.3%, higher than the projections of 7.05 and the prior release of 6.1%. The projected terminal rate at 3.85% is intact, however, short-term inflation expectations are still de-anchored.

On the NZ front, investors are still in a hangover from upbeat Employment Change data. The economic data for the third quarter landed at 1.3%, higher than the estimates of 0.5%.