Aussie unsettled by dire retail data, kiwi up

The Australian dollar took a breather on Monday after a dire set of retail sales numbers suggested the economy was still struggling despite three cuts in interest rates, and that yet more stimulus might be necessary.

The Aussie eased to $0.6914 and off an early top of $0.6925, leaving resistance around $0.6930 intact. It now has chart support around $0.6884.

It dropped 0.3% on its New Zealand neighbour, which in turn helped the kiwi nudge up to $0.6449.

The setback came when government data showed retail sales rose a miserly 0.2% in September, leaving inflation-adjusted sales for the whole third quarter down 0.1%.

That capped a terrible 12-month period in which sales suffered their worst performance since the recession of the early 1990s. It also boded ill for consumption and gross domestic product growth in the quarter.

Futures imply a 24% chance of an easing in December, rising to 54% by March.

Still, the reaction in bonds was restrained by a general sell-off in safe havens amid signs the United States and China were getting closer to agreeing on a "Phase 1" trade deal this month.

The speculation also seemed to help put a floor under the Aussie, given Australia has much to lose from a protracted Sino-US trade war.

Australian government bond futures followed other major debt markets lower, with the three-year bond contract off 3 ticks at 99.190. The 10-year contract fell 5.5 ticks to 98.8450.

"The September retail report disappointed in every respect," said Westpac senior economist Matthew Hassan. "The monthly profile continues to show little or no response to policy measures - interest rate cuts in June-July and tax relief from July."