USD/CAD – Canadian Dollar Plummets on Poor Retail Sales

Canadian retail sales unexpectedly fell in August due to the biggest month-over-month drop in purchases of food and beverages in three-years.

Headline retail sales fell -0.3%. Market expectations were looking for a strong +0.5% gain. On a year-over-year basis, retail sales rose +6.9%.

Ex-autos, retail fell by a steep -0.7%.

The ‘loonie’ has taken it on the chin, as the ‘big’ dollar rallied immediately from just below the C$1.25 handle to touch C$1.2573, the first real resistance point for the dollar.

Stronger headline numbers would have improved the odds of the Bank of Canada (BoC) raising rates before the end of 2017. Today’s print should take the BoC out of the rate hike equation for the time being. The BoC meet next Wednesday, Oct 25.

Canada inflation

Canada’s annual inflation rate accelerated higher in September for a third consecutive month, supported by a surge in gas prices due to the impact of Hurricane Harvey stateside.

The headline CPI rose +1.6% y/y, following a +1.4% advance in the previous month. Market expectations were looking for a +1.7% advance. On a month-over-month basis, CPI rose +0.2%.

Note: Core inflation, edged upward to +1.6%, or an eight-month high.

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell