Aussie trades broadly higher in Asian session as lifted by retail sales data. While AUD/UD is still limited below 0.7896 key near term resistance, EUR/AUD has dipped through 1.5226 support, which signals more Aussie strength ahead. Over the week, Yen remains the strongest one on speculations of BoJ stimulus exit. Dollar suffered steep selling of talks that China will slow purchases of US assets. But still, the greenback in trading mixed, in red against Yen Aussie and Kiwi only.
Australia retail sales grew 1.2% in November
Australian Dollar is lifted by stronger than expected retail sales data today. Retail sales grew 1.2% mom in November, triple of expectation of 0.4% mom. There are talks that RBA could finally join some other global central banks in tightening this year. And RBA could raise the official cash rate by 25bps in August. However, the key would possibly lie in wage growth, which has been sluggish in spite of healthy job market growth. Also, recent cooling of housing markets also lessen the pressure on RBA to hike. These will be the two key factors to watch ahead.
Chicago Fed Evans prefer pause in rate hike
Chicago Fed President Charles Evans said he'd prefer a pause in tightening and wait until mid-2018 before raising interest rate again. He said that "I'd feel a lot more confident if I saw those transitory reductions in the inflation rate go away." And, "if in fact things are worked out we could resume a nice gradual pace (of rate hikes) at that point, and still get the funds rate up to its natural level before too long."
St Louis Fed President James Bullard joined the debate on so far price level targeting. Bullard said Fed's inability to meet inflation target in the past five years resulted in a 4.6% gap in the economy. And that amounts to more than USD 820b in the USD 18T economy. And to compensate for that, Fed would have to allow inflation to hit 2.5% for a decade.
Trump may announce Nafta withdrawal
Reuters reported that Canadian government is increasing convinced that US President Donald Trump will announce withdraw from Nafta, giving six month notice. Officials declined to comment on the rumor. The next talk between the US, Canada and Mexico will start on January 23 in Quebec, Canada. There are talks that officials are already scheduling to meet again in Mexico the next month, but there is no formal announcement yet. Canadian Dollar is mildly lower after the news.
Meanwhile, the President of US Chamber of Commerce Thomas J. Donohue warned that withdrawing from Nafta would be a "grave mistake". He said that "the American economy has taken several big steps forward with regulatory relief and tax reform, and the administration deserves lots of credit. But a wrong move on NAFTA would send us five steps back." He supported the modernization of the 24 year old trade agreement. But he emphasized that the trade agreement "should not close markets, undermine investment protections, or limit trade with regulatory red tape." And, "the bottom line is that growth will be weakened, not strengthened or sustained, if we pull back from trade."
Looking ahead
ECB monetary policy meeting accounts will be a key focus today. Eurozone will also release industrial production. Canada will release new housing price index. US will release PPI and jobless claims.