Retail sales data shows domestic demand still strong in Australia

- Retail sales data shows domestic demand still strong in Australia: (AU MARCH RETAIL SALES: 1.1% V 0.5% expected; Q1 EX-INFLATION QOQ: 2.0% V 1.7% expected; Prior q/q revised to 1.2% from 1.3%) Given the lower gas prices compared to a year earlier, a strong labor market and particularly strong growth in full-time jobs, few analysts were surprised by the strong surge in Aussie retail spending. Aussie retail spending accounts for around 23% of Australia's GDP, and the consensus seems to be that today's retail sales data points to GDP growth of at least 1.0% for the quarter (relatively robust). The AUD rallied sharply on the release, with AUD/USD testing R3 at 0.8282 and eventually moving higher towards 0.8300. The reaction in the bond market was relatively muted, perhaps showing that bond markets seem to think the RBA's hands are tied with recent CPI data coming in soft.

- Traders ignore a sharp drop in Aussie Building Approvals: (AU MARCH BUILDING APPROVALS MOM: -11.4% V -5.0% expected; YOY: -9.6% V 8.7% prior; Prior m/m revised to 9% from 10.6%; Prior y/y revised to 8.7% from 10.0%) The Aussie Building Approvals data series has been very volatile in recent months, and for that reason most traders ignored the weak reading. Many analysts expected March to show some payback for February's strong 10.6% (revised lower to 9.0%) rise.

- Forex: The USD was soft against the EUR, JPY and the GBP, with some analysts suggesting that further USD selling may be premature (they say that markets will have to wait for next month's ISM report for some clarification that things are turning around). Given the soft jobs data last week, others say the market may react to sell the USD further if the Fed implies concern about a slowing economy at Wednesday's press conference. EUR/USD was higher by almost 0.1%, and with the very short-lived USD correction, we could see EUR/USD push higher towards 1.37 by the end of the week. The JPY firmed during Asian trading, but EUR/JPY first support at 163.05 held steady. The AUD managed to add on to gains inspired by the stronger than expected retail sales data, testing the 0.8300 level at the time of writing this. The NZD/USD was up 0.5%, tracking the firmer AUD. After a strong run in recent sessions, the KRW took a breather, trading slightly lower against the USD. The THB ignored comments from the pro-growth Finance Minister, with USD/THB trading lower despite the Minister saying that interest rates have room to fall. In fixed income news, the Japanese Ministry of Finance set a coupon of 1.7% for the 10yr auction (as widely expected). Results for the auction will be announced at 03:45 GMT.

- Equities: The Nikkei225 is little changed, as losses in shares of exporters (due to the stronger JPY) are offset by gains in banking shares. The Kospi is higher by more than 0.10% on gains in shares of Samsung and Hyundai Heavy. The ASX 200 opened at a new all-time high, but buyers stayed on the sidelines ahead of tomorrow's budget speech, sending the index lower by more than 0.5%. Losses on the index are being driven by sharp declines in shares of BHP and Rio Tinto, both rumored to be placing a rival bid for shares of Alcan. Shares of Qantas are lower by more than 2.5%, after its buyout bid failed to close. Following last week's holiday break, Chinese equities resumed their upward ascent and are currently higher by more than 2.5%, setting up for a new record close (despite hawkish comments from the PBoC governor over the weekend)

- Commodities: Tokyo platinum rose to a new all-time high above ??5,000 per gram on ETF speculation and an ongoing platinum strike in South Africa. Shanghai copper rose by its daily limit in a catch-up rally to the LME contract. Despite gains in China, the LME copper contract fell for the 1 time in 7 sessions as the Peru copper strike ended. Spot gold is currently little changed despite declines in the USD. Crude oil is little changed in Asia after falling to a 6-week low during U.S. trading (markets are expecting U.S. gasoline inventories to rise following 12 consecutive weekly declines)