By Swati Pandey
SYDNEY, Feb 6 (Reuters) - The Australian dollar slipped on Monday after making a three-month peak last week, as data showing December retail sales below expectations raised concerns over the economy's lack of momentum.
The Australian dollar AUD=D4 eased 0.3 percent to $0.7666 after the data, slightly off the three-month peak of $0.7696.
Retail sales slipped 0.1 percent in December, below expectations for a 0.3 percent increase. It was the first monthly decline since December 2015. data also showed price gains remained very subdued as the retail deflator rose just 0.3 percent in the quarter, a worrying sign for underlying inflation which is below the central bank's target band of 2-3 percent.
That could spell further cuts in interest rates. The Reserve Bank of Australia (RBA) lowered rates twice last year to fight anaemic inflation.
"There remains the broader trend of softer nominal household demand in the second half of last year," said Citi economist Josh Williamson.
"The risk is that the RBA moves back to an easing bias in recognition of the below-trend domestic growth picture before mid-year."
Still, the futures market is ascribing only a 14 percent chance of another cut by May, while even toying with the idea of a hike by Christmas.
The Aussie has risen 6.5 percent since the start of the year, as the U.S. dollar made a broad retreat as U.S. President Donald Trump's protectionist policies made investors more risk averse. USD/
There was further bearish pressure on the greenback after data on Friday showed subdued U.S. wage growth in January, reinforcing expectations that the Federal Reserve will refrain from increasing interest rates next month. the Aussie slipped against the New Zealand dollar AUDNZD=R , the euro EURAUD=R and the pound GBPAUD= .
The New Zealand dollar NZD=D4 was 0.2 percent higher at $0.7324, rising for a third straight day to stay near a 3-month high.
Investors will watch for the result of the global dairy auction late on Tuesday. Prices had edged up slightly in the last auction following two consecutive declines. auction results can affect the Kiwi as the dairy sector generates more than 7 percent of the nation's annual economic output.
New Zealand government bonds 0#NZTSY= did not trade due to a public holiday in the country.
Australian government bond futures rose, with the three-year bond contract YTTc1 up 2 ticks at 98.02. The 10-year contract YTCc1 climbed 3 ticks to 97.2050. (Editing by Simon Cameron-Moore)