Solid retail sales fails to move loonie
Canada’s retail sales rebounded in October after a disappointing release for September. Headline retail sales rose 1.6% (vs. -0.3% in September), while core retail sales climbed 1.3% (vs. 0.2% in September). The increase was led by sales in motor vehicles and parts, as well as general merchandise. This points to a well-balanced increase in consumer spending, as the recovery accelerates, despite the challenges of the Omicron variant.
Despite the strong retail sales reports, the Canadian dollar remains weak, with the symbolic 1.30 level not too far away. The currency is a key risk barometer, and has been pointing south much of the time. Risk appetite has been curbed by the explosion in the infection rate due to Omicron, with the US reporting its first fatality from the variant. According to the US Centers for Disease Control and Prevention, Omicron now accounts for 73% of all Covid cases in the country. Based on the grim situation in Europe, Omicron will almost certainly lead to a huge spike in infection rates in the US.
Domestically, the latest twist on Capitol Hill has also sapped risk appetite. President Biden has touted the Build Back Better spending bill as a key legislative aim, but the bill is being held up by a Democratic senator, Joe Manchin. Without Manchin’s support, the bill will have to go back to the drawing board as the red-faced Biden will be unable to pass the package before Christmas. Biden and the Democrats desperately need a major legislative victory, as irate consumers, hammered by high gasoline and food prices could send the Democrats to defeat in next year’s mid-term elections.
- USD/CAD has support at 1.2756. Below, there is support at 1.2615
- There is resistance at 1.2987. Above, there is resistance at 1.3077
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