US Retail Sales Highlights Consumer Caution
AUD
The AUD opens mostly lower or flat against the majors. Escalating tensions in the Middle East, with the U.S. deploying more fighter aircraft and issuing veiled threats to Iran's leadership, contributed to the weakness. Reports of explosions and missile launches from both sides, alongside a suspected Israeli cyberattack, fueled concerns. Commodities continued their upward trend, with both natural gas and oil posting gains of over 4%, while precious metals remained largely flat. Asian equities had a mixed day on Tuesday: The Nikkei rose 0.6%, while the Hang Seng fell 0.3% and Shenzhen declined 0.1%. The ASX 200 closed slightly down. There was no significant Australian news released yesterday, though we await the MI Leading Index month-on-month data at 10:30 AM today. The key domestic data release this week will be our employment data tomorrow at 11:30am. The Unemployment Rate is expected to remain unchanged at 4.1%. 20.6k jobs are expected to have been added in May, down significantly from the 89.0k spike in April.
USD
The AUDUSD opened down 0.6% at 0.6469 despite weaker U.S. data overnight. U.S. Retail Sales for May declined by 0.9% month-on-month, a significant drop from a negatively revised -0.1% and worse than expectations of -0.6%, with core measures also generally much weaker than forecasts. Retail Sales have fallen for two consecutive months, unwinding most of the pre-tariff spending splurge. Households are worried about what tariffs may mean for spending power and are increasingly cautious on the jobs market outlook. Released later in the session, U.S. Industrial Production for May fell by 0.2%, also printing worse than expected. Furthermore, President Trump's comments demanding an "unconditional surrender" from Iran triggered some safe-haven appeal for the USD. U.S. equities saw declines: the Nasdaq closed down 0.9%, the S&P 500 down 0.8%, and the Dow Jones down 0.7%. Early tomorrow morning, the Federal Reserve (FED) will announce its key interest rate decision, with expectations for them to hold rates at 4.5%. While an immediate rate change isn't anticipated, the policy meeting should offer crucial signals that could move markets. Fed officials will share their views on future interest rate changes and the economic effects of tariffs and Middle East conflicts. A key point to watch will be whether Federal Open Market Committee members still predict two rate cuts this year.
EUR
The AUDEUR opens essentially flat at 0.5637 after trading sideways for the last 24 hours. European equities saw declines, with the DAX down 1.1% and the CAC down 0.8%. In terms of data, we have the Current Account due this evening, forecasted at 40.4 billion, as well as the Final CPI year-on-year, forecasted to remain unchanged at 1.9%. Looking ahead, the week appears fairly quiet with only some lower-tier data expected in the coming days.
GBP
The AUDGBP opened slightly up from yesterday at 0.4819. UK equities saw the FTSE close down 0.5%. There was no significant UK data released yesterday, but today we have their CPI year-on-year out at 4 PM. It is expected to come in at 3.3%, down from the previous reading of 3.5%. Tomorrow morning, the Bank of England is predicted to keep interest rates steady, after cutting them to 4.25% in May. It's expected that seven out of nine members on the Monetary Policy Committee will vote to maintain the current rate, a reversal from last month when most voted for a 0.25% reduction. Recent disappointing jobs numbers, lower wage growth and a more optimistic outlook for services inflation means further interest rate cuts are expected in the coming months.
NZD
The AUDNZD opened at 1.0760, continuing its trend of trading sideways. Yesterday, New Zealand saw its GDT Price Index come in at -1%, and its Current Account printed at -2.32 billion. Tomorrow morning, their GDP quarter-on-quarter is expected to remain unchanged at 0.7%, in line with last quarter.