The Australian dollar's retail sales boost was short-lived as other data underwhelmed

Photo by Karl Walter/Getty Images for Stagecoach

The Australian dollar had a boost after retail data beat expectations, but that was as good as it got after capex and China manufacturing, which matter more to the fortunes of the economy, both disappointed.

As this chart shows, the dollar surged to a session high after Australian retail sales data for April surpassed expectations. However gains were short lived and the currency tumbled to a session low after a private gauge of China‚Äôs manufacturing fell back into contractionary territory for the first time since June 2016. To add to the currency’s misery local capital expenditure data too underwhelmed.

The currency touched a high of 74.54 US cents after the retail data, but slipped to a two-week of 73.85 US cents subsequently.

Retail sales grew by 1.0% in April in seasonally-adjusted terms, coming in well above forecast growth of 0.3%. It was a strong result after falls in three of the past four months.

But then Capex data, which nudged up modestly in the March quarter, also showed the outlook for investment and spending on equipment, plant and machinery was below expectations. That added to downside risks to GDP growth both now and in the future.

That was followed by China data. The Caixin PMI, which has a smaller sample size than the government measure, fell below 50 for First Time since June 2016.

A number below 50 denotes contraction and indicates a possible economic slowdown. That is not good news for Australia, which counts China as its largest trading partner and primary consumer of iron ore and coal.

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