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Australia dollar slips on squishy retail sales, NZD higher
[SYDNEY] The Australian dollar slipped on Monday after making a three-month peak last week, as data showing December retail sales below expectations raised concerns over the economy's lack of momentum.
The Australian dollar eased 0.3 per cent to US$0.7666 after the data, slightly off the three-month peak of US$0.7696.
Retail sales slipped 0.1 per cent in December, below expectations for a 0.3 per cent increase. It was the first monthly decline since Dec 2015.
The data also showed price gains remained very subdued as the retail deflator rose just 0.3 per cent in the quarter, a worrying sign for underlying inflation which is below the central bank's target band of 2-3 per cent.
That could spell further cuts in interest rates. The Reserve Bank of Australia (RBA) lowered rates twice last year to fight anaemic inflation.
"There remains the broader trend of softer nominal household demand in the second half of last year," said Citi economist Josh Williamson.
"The risk is that the RBA moves back to an easing bias in recognition of the below-trend domestic growth picture before mid-year."
Still, the futures market is ascribing only a 14 per cent chance of another cut by May, while even toying with the idea of a hike by Christmas.
The Aussie has risen 6.5 per cent since the start of the year, as the US dollar made a broad retreat as US President Donald Trump's protectionist policies made investors more risk averse.
There was further bearish pressure on the greenback after data on Friday showed subdued US wage growth in January, reinforcing expectations that the Federal Reserve will refrain from increasing interest rates next month.
Elsewhere, the Aussie slipped against the New Zealand dollar, the euro and the pound.
The New Zealand dollar was 0.2 per cent higher at US$0.7324, rising for a third straight day to stay near a three-month high.
Investors will watch for the result of the global dairy auction late on Tuesday. Prices had edged up slightly in the last auction following two consecutive declines.
The auction results can affect the kiwi as the dairy sector generates more than 7 per cent of the nation's annual economic output.
New Zealand government bonds did not trade due to a public holiday in the country.
Australian government bond futures rose, with the three-year bond contract up two ticks at 98.02. The 10-year contract climbed three ticks to 97.2050.