HKD: De-Peg Costs Outweigh Benefits - Commerzbank

AUDUSD is off its post-Australian data low of 0.6443 but remains down 0.2% to 0.6454 today as the US dollar rallies (USD BBDXY +0.2%). Aussie is also weaker against other major currencies despite higher commodity prices and HK/China equities, but US futures are lower. 

• March household consumption fell 0.3% m/m with Q1 volumes flat, while building approvals were down 8.8% m/m. Both series were impacted by Cyclone Alfred with data for Queensland particularly weak.
• AUDJPY is down 0.2% to 92.79, close to the intraday low, after a high of 93.05. AUDEUR is 0.2% lower at 0.5705, finding support around 0.5700. AUDGBP is -0.2% to 0.4856.
• AUDNZD has been trending down since it reached 1.0849 earlier in the session. It is now 0.2% lower at 1.0820, close to today’s trough.
• Equities are generally stronger with the Hang Seng up 0.6% and TAIEX +0.3% but ASX flat and S&P e-mini down 0.3%. Oil prices are stronger with WTI +1.6% to $58.04/bbl. Copper is 0.8% higher and iron ore is up to around $98-99/t.
• Later US March trade data are released as well as Canadian trade & PMI and European services/composite PMIs for April.

Building approvals in March were significantly weaker than expected falling 8.8% m/m with the more stable private houses component down 4.5% m/m. Multi-dwelling approvals fell 15.1% m/m, the second consecutive monthly fall. Housing shortages persist and this is an unfortunate development but appears also to have been impacted by Cyclone Alfred with Queensland recording a drop in house approvals but Victoria was also weak.

• Total building approvals are now up 13.4% y/y after 26.5% y/y in February with private houses down 3.3% y/y, the lowest since November 2023, but apartments still up 47.1% y/y.
• The ABS said that the weakness in house approvals was driven by Queensland and Victoria, while for non-houses there was a sharp drop in Victoria.
• The value of total residential building approved fell 7.6% m/m in March.
• Victoria is making up over half of the value of non-residential building, which may be crowding out the residential sector given skill shortages in construction.

Australia no. of residential building approvals y/y%

March household spending was weaker-than-expected falling 0.3% m/m to be up 3.5% y/y after an upwardly-revised +0.3% m/m & 3.6% y/y. Q1 volume data was also released, which is now seasonally adjusted. It showed no growth on the quarter, in line with retail sales, to be up only 0.9% y/y after +1.6% q/q & 2.3% y/y in Q4, consistent with the view that the RBA is likely to ease 25bp on May 20. Private consumption in the national accounts is likely to be close to flat in Q1 when it is released on June 4. 

Australia household consumption volumes q/q% sa

• The decline in March was impacted by Cyclone Alfred with it falling 1.3% m/m in Queensland but food spending there rose 2.9% m/m.
• The March weakness was driven particularly by services spending which fell 0.7% m/m but is still up 5.1% y/y. Goods rose 0.1% m/m to be up 2.3% y/y.
• Non-discretionary expenditure continues to exceed discretionary as cost-of-living pressures persist. The former was flat in March to be up 4.4% y/y, while the latter fell 0.4% m/m to be steady at 3.0% y/y.
• The softness in Q1 volumes was driven by alcohol & tobacco spending (-5.9% q/q & -16.5% y/y) and hotels & restaurants (-1.2% q/q & -0.7% y/y). Recreation & culture posted another solid quarterly rate. 

Australia consumption discretionary vs non-discretionary y/y%

Source: MNI - Market News/ABS