USD/CAD Canadian Dollar Higher as Retail Sales Soar

  • Canadian inflation slows
  • Canadian retail sales soar
  • Data this morning showed that Canada’s inflation rate in June decelerated for the fourth time in five-months and rose at its slowest pace since the fall of 2015.

    Like other G7 nations, Canada continues to deal with the challenge of weak pricing pressure amid improving growth prospects.

    Canada’s all-items consumer-price index in June increased +1% y/y, following a +1.3% advance in May. The market was expecting a +1.1% gain.

    On a month-over-month basis, CPI in June declined -0.1%.

    Lower energy and gasoline prices from a year ago were the main downward contributors on June CPI.

    Note: The average rate of annual core inflation, based on three gauges used by the BoC, rose +1.4% in June vs. +1.3% in May.

    Retail Sales

    Canadian retail sales climbed in May for a third consecutive month, powered by demand for new and used cars.

    Ex-autos, retail receipts fell a tad.

    The value of retail sales in May rose +0.6% on a seasonally adjusted basis to +C$48.91B. That exceeded market expectations for a +0.3%.

    In volume terms, total retail sales rose by a faster +1.1% in May.

    The loonie has taken flight and is currently trading atop of the overnight highs at C$1.2554, up +0.35%

    The BoC expects household expenditures to remain robust in the near term, supported by job gains and firmer wage growth.

    However, consumption is expected to ease as housing activity slows down, and consumers deal with elevated debt loads amid an environment of rising borrowing costs. Governor Poloz hiked rates +25 bps to +0.75% for the first time in seven years this month on an improving economy.

    This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

    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