The Australian dollar fell further below the 1.0800 technical resistance level following a more than disappointing retail sales figure in the overnight session.  Now, trading at 1.0735 against the US dollar, the Pacific currency is lower by 0.15% on the day.

According to Australia’s Bureau of Statistics, retail sales in the month of December dipped by 0.1% – month over month.  The figure is a pessimistic economic tidbit when considering market expectations of a 0.2% rise in the final month of 2011.  Survey readings were led lower as consumer expectations for the near term future of the economy declined – lending to less spending in the country’s restaurants.  Even as shopper consumption rose by 1.1% in department stores, restaurant spending fell by almost 2%.  However, the report results shouldn’t be that surprising as consumer sentiment continued to remain low at the end of the year following worse than expected employment data.  Although the economy still continues to benefit from a mining sector boom and export growth, the country had the worst year for employment in almost 2 decades.

The figures are likely to boost speculation ahead of tonight’s Reserve Bank of Australia interest rate decision.  Although money markets are pricing in a bit higher than 50% chance of a rate cut, FX spot market expectations are a bit higher than that.  The country’s central bank is expected to cut rates by another 25 basis points to 4% – following a rate cut in both November and December of last year.

Supportive of a rate cut – aside from economic fundamentals – is the evidence that growth is slowing in the Asia, a main trade sector for the country.  Slowdowns have already been seen in China and South Korea – which have led to further speculation of near term looser monetary policy in both countries.  The sentiment is reinforcing the necessity of a rate cut in Australia in order to keep growth churning along for the economy.