Loonie Plummets on Weak Data

Data this morning showed that Canada’s annual inflation rate slowed slightly last month, but remained above the Bank of Canada’s (BoC) +2% inflation threshold for a third consecutive month.

Canada’s CPI rose +2.2% on year-over-year basis in April. Today’s headline print was just shy of the markets expectation of +2.3%. On a month-over-month basis, prices climbed +0.3% in April.

Digging deeper, the BoC’s preferred gauge – average core inflation – rose on a 12-month basis to +2.03%, the highest level in nearly six-years.

Canada Retail Sales Climb

Canadian retail sales rose for a third consecutive month in March, beating market expectations.

March retail sales rose +0.6% m/m, on a seasonally adjusted basis to C$50.24B. The consensus was looking for a +0.3% gain. On a price-adjusted, or volume, basis, retail sales increased by a higher +0.8% in March.

Stats Canada also revised both January and February prints a tad higher to +0.3% (+0.1%) and +0.5% (+0.4%) respectively.

Digging deeper, sales rose in six of 11-subsectors, led by a 3.3% advance at new-car dealers. However, ex-autos, retail sales declined -0.2%.

Going forward

Due to higher interest rates and new mortgage financing rules, introduced last January, Canadian households are expected to pare back their spending habits to service their increasing debt loads.

The CAD (C$1.2895) has come under considerable pressure, paring back all of this week’s gains, and about to tackle the psychological C$1.2900-20 level where there is some initial interest to buy the loonie.

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