The Australian dollar has taken another leg lower overnight coinciding with the release of the latest U.S retail sales report which jumped 0.8 percent in July, outpacing expectations of a more moderate 0.3 percent rise. Although we saw an immediate move to the upside from high-beta currencies such as the Aussie and Kiwi, we soon saw the trajectory turn sharply south as investors recalibrated stimulus expectations. As has been the case in recent years, the premise of stimulus (more specifically quantitative easing) has at times been a pillar of support for U.S markets and risk currencies alike. Firstly, this serves to weaken the U.S dollars safe-haven appeal as risk assets move higher and most importantly undermines the greenbacks value given its natural inverse relationship to stimulus.  As investors unwind the chances of further stimulus, this creates clear implications for currencies that have benefited most with risk currencies such as the Aussie and Kiwi the first in line. The Australian dollar is currently around the 104.9 US cent region, slightly off lows just below 104.8 US cents.

Relative to expectations, it was a moderately positive night for data releases from both sides of the Atlantic with growth data from Germany and France printing slightly ahead of expectations, while an unexpected rise in U.S retail sales provided a foundation for sentiment.  German gross domestic product grew a seasonally adjusted rate of 0.3 percent in the second-quarter according to preliminary estimates released - slightly ahead then the 0.2 percent expected. From the same period last year, the German economy grew 1 percent down from first quarter growth of 1.2 percent. Euro-Zone gross domestic product fell 0.2 percent in the second-quarter to represent an annual contraction of 0.4 percent - in line with consensus estimates. Nevertheless, the undertone of negativity is still very much common place with the latest German ZEW survey of economic sentiment sliding to -25.5 in August from a previous -19.6. Euro-zone industrial production was consistent with estimates, falling 2.1 percent in June from a previous upward revision of -2.6 in May.

Local domestic releases today include Westpac consumer confidence for August, and second-quarter wage price index data. Both releases alongside regional equity performance will be the key directive for the local unit in the domestic session, with a break to the downside of short-term support around the 104.8 US cent region, likely to see weakness contained around 104.35 US cents which has previously displayed supportive behaviour.

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