AUD/USD Bullish as Australia’s Retail Sales, Business Conditions Rise
Aiswarya Gopan • 2 min read
In promising signs indicating economic recovery, Australia’s retail sales continued to increase into the month of March even as business conditions improved to touch record highs in April. Data released by the ABS reveals that retail sales increased by 1.3% during March, slightly lower than the 1.4% increase seen in the previous month.
However, retail sales volumes in real terms posted a decline from +2.5% during Q4 2020 to -0.5% in Q1 2021, although this was driven by an increase in the share for spending on services in the recent quarter over goods. The implicit price deflator which measures the price of average goods posted an increase of only 1.6% YoY in Q1 2021, revealing no significant increase in inflation even as the economy recovers.
Heating up of inflation is a growing concern across leading economies as they emerge from the coronavirus pandemic driven downturn, especially on the back of strong fiscal and monetary support. However, the mild pick-up in this reading maintains that inflation has not surged across Australia even as its economy is on the rebound.
Meanwhile, National Australia Bank’s index measuring business conditions across the nation surged to 32 for the month of April, the highest reading ever recorded, as most industries reported improvement in businesses following the reopening of the economy. Business confidence also rose nine points higher to touch 26 in April – another record high reading.
Effect on AUD/USD
The release of this data supported the uptrend in AUD/USD, helping it strengthen its bullish momentum. The AUD/USD has been climbing higher on the back of a weakness in the US dollar in addition to enjoying support from the risk-on sentiment in global markets over hopes of economic recovery worldwide.