Australian Dollar in the Red on Chinese Retail Sales and Housing Rescue Disappointment

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The Australian Dollar is the day's worst-performing G10 currency on the back of fresh evidence of a slowing Chinese economy and a tinge of investor disappointment at new measures aimed at boosting the housing market.

The Pound to Australian Dollar exchange rate was higher by a third of a per cent at 1.9019 after Chinese retail sales printed at 2.3% y/y in April, which was down on March's 3.1% and the consensus expectation for 3.8%.

"A downside miss in retail sales are sounding the alarm bells over the economy," says a note from TD Securities. "Consumer confidence is clearly shaky."

Disappointing news regarding Australia's most important trading partner meant AUD was down against all its G10 peers on the day, with the Australian Dollar to U.S. Dollar conversion lower by a third of a per cent at 0.6652.

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These data are based on the spread surveyed in a recent survey conducted for Pound Sterling Live by The Money Cloud.

The retail sales were released on the same day China announced plans to boost its stalled property market, which is a key engine of demand for Australia's raw material exports.

The People’s Bank of China effectively scrapped the nationwide minimum mortgage interest rate while cutting the minimum down-payment ratio to 15% for first-time buyers and 25% for second homes. The previous ratios stood at 20% and 30%, respectively.

The government also said local governments should acquire homes at "reasonable" prices and turn them into affordable housing, according to state-run Xinhua News Agency, which cited Chinese Vice Premier He Lifeng.

The Australian Dollar rallied earlier in the week when newswires first reported rumours of the package, hinting that perhaps the final announcement disappointed. Softer AUD exchange rates would certainly hint at some disappointment.

The new housing market 'destocking' programme will allow banks to tap a CNY300BN facility for loans at a rate of 1.75% for 1 year, which can be rolled over 4 times.

The new facility is an expansion of an earlier trial rolled out to eight cities in early 2023 that allowed banks to tap CNY100BN of funds from the PBoC to buy unsold housing.

"We reckon doubts will start to creep in regarding the success of such a new re-lending facility given the low and slow take up during the trial as only CNY2bn of loans were taken up as of Q1'24. Further, the size of the facility may have disappointed investors as it's only a paltry CNY300bn, when estimates being discussed for such a fund stand in excess of CNY1tn," says TD Securities.