U.S retail sales surged ahead in the latest reading with automobile sales making up most of the revision higher. A string of tax cuts announced by Trump earlier in the year and generally more bullish consumer sentiment are likely the main drivers.
This strong showing however didn’t filter through to the USD with AUD/USD higher overnight bucking the trend which saw the Aussie down against all the majors including the GBP and EUR. AUD/USD which has been range trading between 0.7650 and 0.7800 is again getting exceptionally close to the top of this recent range, which suggests either more of the same or a breakout will occur at some point. With U.S interest rates likely to continue to rise and commodities remaining well and truly off the boil my immediate impulse would be to say to expect lower lows as opposed to higher highs. If this is the case hedging USD exposures with a Forward Contract is your best strategy – but it all comes down to each individual businesses strategy. If you’re running a business where you can increase prices if AUD drops then there is absolutely no need to hedge your exposures. However if you’re in a competitive industry and particularly one where you cannot move prices if AUD drops then hedging is in my humble opinion a must as hedging would allow you to lock in your profits but also guarantee no losses if AUD moves lower.
DATA RELEASES TODAY:
AUD – Monetary Policy Meeting Minutes at 11.30am
CNY – GDP q/y at 12.00pm
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Senior Corporate FX Dealer
Phone Patrick – 0431 278 632