SYDNEY (REUTERS) – The Australian dollar was heading for a steady end to a choppy week on Friday as surprisingly strong spending data at home helped offset global concerns about rising coronavirus cases abroad.
The Aussie was holding at US$0.6855 having been as low as US$0.67770 early in the week when worries over the growth of the disease in the United States rattled stock markets.
That left the Aussie almost unchanged for the week, and still some way from its recent 11-month peak of US$0.7069.
The New Zealand dollar was a shade softer at US$0.6414, to be down 0.5 per cent for the week so far. It has struggled since data showed the economy contracted by more than expected in the first quarter.
In contrast, Australian figures out Friday showed retail sales surged a record 16.3 per cent in May as a wide scale easing in coronavirus lockdowns allowed entire sectors to re-open.
The stunningly strong bounce suggests consumer spending will be not nearly as weak as first feared in the June quarter, offering hope the economy was on the road to recovery from its first recession in three decades.
Gareth Aird, a senior economist at CBA, noted the level of sales was particularly encouraging as it was the second highest ever, only beaten by the March result when shoppers were panic-buying staples.
“We are still in the early stages of the recovery, but it looks like a positive feedback loop is slowly evolving between consumer confidence and household spending,” he said.
“There are risks still on the horizon of course, and we do anticipate a high level of unemployment to remain for some time. But there are some encouraging signs on the spending front.”
The data will be welcome by the Reserve Bank of Australia (RBA) which has said there were signs the downturn will not be as severe as first feared.
Still, it remains committed to holding rates near zero for year to come which kept bonds well supported. Yields on 10-year bonds edged down to 0.873 per cent on Friday, well off the recent top of 0.977 per cent.
The three-year bond future was a shade easier on the day at 99.775, implying an yield of 0.275 per cent.
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