AUD/USD spikes as hoarding pushes Australian retail sales to 20-year high

AUD/USD spikes as hoarding pushes Australian retail sales to 20-year high

  • The AUD/USD pair rose after upbeat March Australian retail sales data.
  • Data from ABS showed that retail sales rose by 8.2% in March as people shopped ahead of lockdown.
  • Strong retail sales were offset by a decline in hospitality and clothing sales.

The Australian dollar rose sharply after the bureau of statistics released upbeat March retail sales data. The AUD/USD rose by more than 0.60% while the AUD/EUR and AUD/GBP rose by more than 50 basis points.

Australian dollar
Australian dollar rises after strong retail sales

Australia March retail sales

Australian’s made record shopping in March. According to the Australian Bureau of Statistics (ABS), the seasonally-adjusted retail sales rose by 8.7 per cent in the month. This passed the previous record of 8.1 per cent, which happened in June 2000.

The increase in retail sales was driven primarily by groceries and other household items like tissue paper and pasta as Australians prepared for a lockdown. In the statement, the ABS said:

These preliminary figures, indicate unprecedented demand in March in the Food retailing industry, with strong sales across supermarkets, liquor retailing and other specialised food. Additional analysis indicates monthly turnover doubled for products such as toilet and tissue paper, and rice and pasta. In addition to food retailing, sales were also strong in retail industries selling items related to home offices.

The surge in household items was partially offset by a significant reduction in hospitality industries like hotels and cafes. Clothing and accessories also slumped during the month.

Recent retail sales data from several countries have shown that people rushed shopping ahead of the lockdown. In the United States, while overall sales declined, those from companies like Walmart (NYSE: WMT) and Amazon (NASDAQ: AMZN) boomed. The same was true in the UK, where companies like Tesco recorded record sales in the first quarter.

The data came a day after the bureau reported weak jobs numbers. The data showed that the jobs declined by 6 per cent between March 14 and April 4. This slowdown was driven by a sharp decline of people under 20, for whom jobs declined by 9.9 per cent. Most of these job losses were in the accommodation and food services and arts and recreational services.

Australia starts reopening

These numbers come at a time when Australia is reopening its economy. The government has allowed several businesses and schools to start doing business. This has happened at a time when the country has flattened the curve on total and daily infections.

According to the health ministry, day new cases have been around 20 from a peak of 537 in March. Also, the number of active cases has dropped from 4,935 in early April to less than 2,000.

Still, experts are warning the government against complacency because the disease still has no cure. Also, countries like Singapore and Spain that eased restrictions earlier on has seen a surge in secondary cases.

Meanwhile, the country appears to be in a better position to bounce back because of the Chinese recovery. China, its biggest trading partner has been opening up, as evidenced by the recent trade and GDP numbers. Better still, Australia’s manufacturing sector had an upbeat March when the PMI rose to 53.9.

This recovery has been helped by a surge in government spending and the aggressive actions by the central bank. The government has unleashed its biggest stimulus ever worth more than $100 billion while the central bank has initiated its first quantitative easing program.

AUD/USD technical outlook

AUD/USD technical forecast

The AUD/USD pair rose to an intraday high of 0.6352. On the daily chart, the pair found some significant resistance at the 61.8 per cent level of 0.6448. The pair is also trading slightly below the 50-day and 100-day EMA. Therefore, I expect the pair to resume the upward trend if it founds strong support at the 50% EMA at 0.6267.

By Crispus Nyaga
Crispus Nyaga is a finance analyst and trader with more than 7 years industry experience. He's contributed to some of the leading financial brands in the world including Seeking Alpha, MarketWatch, Forbes, and Crispus has an excellent understanding of global macroeconomic and geopolitical issues, is a big fan of golf, and lives in Nairobi with his wife, son, and nephew.

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