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Australian retail sales rose a modest 0.2%m/m in May, after a revised flat outcome in April (originally reported as a -0.1% dip). The market consensus for the May outcome was a +0.5% rise. Other data showed May building approvals up 3.2%m/m, which was slightly below the 4.0% forecast. The April fall was revised to  -4.1%m/m. 

• By sub category we had strong rebounds in both apparel retail sales and department store spending. Both categories were up close to 3%m/m, but this follows similar falls in April.
• The ABS noted: "‘Clothing retailers and department stores were boosted by people buying winter clothes, having held off on those purchases with the warmer-than-usual weather last month,’ Mr Ewing said."
• Otherwise, spending trends were either flat or down a touch. Notably food retailing fell by 0.4%m/m, after declining 0.2% in April.
• The y/y pace eased to 3.4% from 3.8% in April, see the chart below. The general trend in spending momentum is too moderate after last year's fiscal impulse for households helped drive a brief strengthening.
• The RBA meets next week, and the market has a 25bps cut priced in. Today's data is likely to reinforce easing expectations at the margin.
• Note this is the second last retail sales release, with the release to be replaced by the household spending series (the next update for this print is on Friday). 

  Fig 1: Australia Retail Sales Momentum Eases Further 

Source: Bloomberg Finance L.P./MNI 

US stocks outperformance is now widening out to the broader market and global risk sentiment remains very positive. The JPY underperformance against the GBP and potentially the EUR seems to be stalling for now, it continues to perform best against the CNH.

• EUR/JPY - Overnight range 168.46 - 169.52, Asia is trading around 169.45. Decent demand was seen around 168.50 overnight as the pair consolidated some of its recent gains. First support is back towards the 167.50 area, a break back above 170.00 is needed to reengage the upward momentum.
• GBP/JPY - Overnight range 196.29 - 197.55, Asia trades around 197.30. Good demand seen towards the support around 196.00, the pair could look to consolidate as we look toward NFP Thursday. The pair remains in an uptrend and dips should be supported for now.
• NZD/JPY - Overnight range 87.22 - 87.67, Asia is currently dealing 87.55. NZD/JPY continues to trade sideways as it consolidates, a sustained break above 88.00 is needed for the market to turn its focus back to the 90.00 area. The longer this cross stalls up here the greater the chance of it turning back towards the 96.00 area.
• CNH/JPY - Overnight range 19.9368 - 20.0750 Asia is currently trading around 20.0475. A big reversal from the 20.50/20.60 resistance area. In the middle of its recent range awaiting clearer direction with a bias to sell rallies.

Fig 1 : GBP/JPY Hourly Chart

Source: MNI - Market News/Bloomberg Finance L.P

The BBDXY range overnight was 1185.43 - 1191.23, Asia is currently trading around 1188. The BBDXY initially made new lows overnight before finally finding some demand around the 1185 area, this looks to potentially be some paring back of shorts as the market eyes the NFP on Thursday. This USD has opened slightly lower in the Asian session, -0.10%. The larger picture remains one of USD weakness, short-term though price is beginning to look a little stretched and we could see more profit-taking heading into NFP. In the current environment rallies should continue to be met with supply, first resistance is back towards the 1205/1215 area.

• (Bloomberg) -- “The dollar is set for deeper losses in the second half because US policy volatility is overwhelming support from yield differentials and a patient Federal Reserve.”
• Robin Brooks on X: “Is a Trump risk premium dragging down the Dollar? That's the consensus, but data say otherwise. The Dollar fall is really just about markets pricing a dovish Fed, which makes no sense because tariffs are about to push up US inflation.”
• Otavio Costa on X: “Fascinating move. You can tell a secular decline in the dollar is likely underway when emerging market currencies begin breaking key resistance levels. Dollar downturns tend to be long-lasting and broad-based, typically fueling rallies in metals, other commodities, and foreign currencies. The last time we saw this kind of shift was in the 1970s and again in the early 2000s. We have probably triggered another one of these cycles, in my view.” The BBDXY has broken convincingly now below 1200, this close could prove to be significant and points to the potential start of another leg lower, first target 1150 and then beyond.
• There is a broad consensus that the USD is set to embark on a decent move lower as the world reduces its exposure to the US and repatriates a lot of these flows. This consensus will also result in some decent short squeezes as a lot of the market is positioned the same way.
• Data/Events :  MNI Chicago PMI, Dallas Fed Man. Activity, NFP on Thursday will be very important.

Fig 1: BBDXY Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P