The preliminary retail turnover in June grew 2.4% in Australia, the earliest look at vital consumer spending data in the economy. While it doesn’t seem much, the Australian Bureau of Statistics (ABS) shows that the turnover rose 8.2% when compared to June 2019 –something that triggered investors’ interest as the economic shock created by the COVID-19 pandemic affected the economy only since this March.
The Australian Dollar (AUD) is one of the best performers in the FX market. It is literally higher across the board in the recent trading weeks, reflecting investor’s confidence in the RBA’s ability to set the right monetary policy but also in the strength of the Australian economy and its ability to recover.
Quick Chinese Recovery Did Help
One of the factors that tremendously helped the Australian economy was the earlier recovery of the Chinese economy. When the lockdowns began in the Western world and Australia, the Chinese economy reopened, and the activity picked up slowly but surely.
As a big chunk of Australia’s exports goes to China, its economy was one of the first ones to benefit from its proximity to the Chinese economy. Thus, funds kept flowing to the Australian economy, helping it alleviate the coronavirus shock.
Details of the June 2020 Retail Sales Data
The June 2020 rises were led by takeaway food services, restaurants, and personal accessory retailing. Food retailing grew as well, albeit only by 0.9% when compared with the previous month. On the other side of the spectrum, household goods declined, but even with this decline, the data is still better than the one in the similar period of 2019.
Once again, the AUD enjoyed the positive data. In a week with no important economic releases from other parts of the world, the AUD pairs relied mostly on the RBA Minutes released earlier this week and the stock market evolution in the United States.
Since the coronavirus pandemic, the AUD pairs traded in a strong correlation with the United States stock market. The AUDUSD and the AUDJPY moved in tandem with the stock market, while the EURAUD in an inverse correlation.
At some point in the near future, these correlations will change. When economic data, and not the virus evolution, will matter for investors again, that is the point when the AUD will decouple from the US stock market.
Until then, as all central banks lowered the interest rates close to zero, there is little or no incentive for investors to look for other reasons to invest in their search for higher yields.