Trade data however was not nearly as positive with the overall surplus for April not only missing market expectations but printing lower than 1.69B figure the month prior. Higher fuel prices drove imports up 1.0% while exports rose a measly 0.5% versus 10.0% gain the month prior. The news suggests a considerable deceleration of demand for Australian exports and if that trend persists resulting in a deterioration of the country's terms of trade it could carry much greater weight in RBA's policy making process than the strong consumer spending numbers.
For now market consensus is that today's data will not motivate the RBA to tighten monetary policy further at its next meeting June 7th. However, if trade numbers show improvement into the summer and consumer spending continues to grow at a healthy 0.5% rate or better, the chance and additional rate hike to 5% will increase considerably by July and August.
The price action in the AUD/USD reflected the mixed message of the data with the pair first rising to 1.0665 in the aftermath of the report, but then quickly selling off towards the 1.0600 level as profit taking kicked in. With Ascension day in Europe, trading may be listless throughout the session, but as North America comes on line, risk flows with determine the direction of Aussie trade for rest of the day. If US equities continue to sell off, the pair may slide through the 1.0600 figure once again as fears of slowdown in global economic growth trump strong Australian fundamentals.
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