The Australian Dollar weakened in the early morning hours of the trading day after the release of Australian economic data failed to meet market expectations. Retail sales for the month of February disappointed traders with numbers coming in at -1.4% on expectations of a rise of 0.3%. This sent the AUD/USD to a low of 0.9144 from an opening day price of 0.9187.
The unexpected drop in retail sales may be a signal that the recent interest rate increases by the Reserve Bank of Australia are beginning to cool the Australian economy. The overnight cash rate was increased by 25 basis points to 4% this past month.
Consumer spending makes up roughly one half of the Australian economy. Therefore, the sudden plunge in retail sales may be enough to convince the Reserve Bank of Australia to keep interest rates at their current level when the policy board meets next week. This should have a weakening affect on the Australian Dollar. The next major support level for the AUD/USD rests at 0.9000.