AUDUSD
The Aussie came under selling pressure on Thursday again, closing at 0.7018(-13 pips) against the greenback.
According to the Australian Bureau of Statistics (ABS), sales grew by just 0.1% during the month in seasonally adjusted terms, coming in well under the modest 0.3% increase expected. Adding to the downbeat tone of the report, non-food sales — regarded as a better gauge on discretionary spending patterns — were flat, failing to bounce following a large 1.1% decline in December.
That is a worry, suggesting that households are cutting back spending on the little luxuries in life. From a year earlier, total sales increased by 2.6%, the weakest result since May last year. For non-food sales, growth was even worse over the same period, increasing by just 1.7%. Not since October 2017 has annual non-food sales growth been this low.
Looking through the monthly data, the ABS said the performance across various categories was “mixed”. Spending on food, at cafes, restaurant and takeaway outlets and “other” retailers grew by 0.3%, 0.3% and 0.7% respectively, offsetting falls of 2.1% and 0.3% respectively at department stores and at clothing, footwear and personal accessory retailers. Sales of household goods were flat, likely reflecting the downturn in Australia’s housing market and multi-decade lows in housing turnover.
Turning to the day ahead, all attention today will be offshore with no major Australian economic data releases of note. In Asia, the main event will come from China with the release of trade data for February midway through the session. A trade surplus of $US26.4 billion is expected. It’s also worthwhile reminding at this point that the timing of Lunar New Year celebrations in China often creates unusual movements in Chinese data at this time of the year.
EURUSD
The Euro tumbled and closed at 1.1197(-115 pips) against the greenback.
The European central bank changed its forward guidance on rate hikes, stating that would maintain at their present levels 'at least through the end of 2019, and in any case for as long as necessary,' a change from the previous 'through the summer of 2019.'
Furthermore, ECB President Draghi announced a new series of quarterly targeted longer-term refinancing operations (TLTRO-III), which will be launched in September this year and will last until March 2021.
The ECB downgraded this year growth forecast to 1.1% from the previous 1.7%, while inflation for this year is now seen at 1.2% vs. 1.6% in December.
During the press conference, Draghi acknowledged that the near-term growth outlook is weaker-than-anticipating, blaming weakness mostly to external factors. Also, several members presented the option to change forward guidance on rates to March 2020, adding pressure on the EUR. The greenback, on the other hand, benefited from better-than-expected employment data, relevant ahead of the NFP release this Friday.
For the week ended March 1, weekly unemployment claims resulted at 223K, better than the 225K expected, while the Unit Labor Cost in Q4 increased to 2.0%, more than doubling the previous reading. Furthermore, Nonfarm productivity in the same period increased by 1.9%. Friday will be a quite busy day, as it will kick start with Chinese February Trade Balance data with the focus on US-China trade deficit, later followed by the US Nonfarm Payroll report.
The US economy is expected to have added 180K new jobs in February, while the unemployment rate is foreseen at 3.9%, below the previous 4.0%. Average hourly earnings are expected to have risen by 0.3% MoM and by 3.3% YoY. Such numbers could give the greenback an additional boost, particularly against weaker European currencies.
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