Canadian dollar shrugs as retail sales jump

The Canadian dollar has started the week with small gains. In the European session, USD/CAD is trading at 1.3958 at the time of writing, down 0.15% on the day. There are no tier-1 events out of Canada or the US today, which means we can expect a quiet day for the Canadian dollar.

Canada’s retail sales surge

The week ended on a high note as Canada’s retail sales are expected to have jumped 0.7% y/y in October. This follows an upwardly revised gain of 0.4% in September. In the third quarter, retail sales were up 0.9%.

This marks a strong turnaround after a sharp contraction in the first half of the year and indicates that the Bank of Canada’s aggressive interest rate cuts are supporting consumer spending. The BoC has chopped rates by 1.25% since June, lowering the cash rates to 3.75%, its lowest level in two years.

The BoC meets next on Dec. 11 and is expected to lower rates, with a 25 basis point cut the more likely scenario. October inflation surprised on the upside, rising from 1.6% to 2%, and today’s strong retail sales data supports a smaller size cut. As well, the government is removing a sales tax on some items from December 2024 until February 2025. This could dampen spending in November as consumers might delay purchases until December to take advantage of the sales tax holiday.

In the US, the PMI reports pointed to continued weakness in manufacturing, while the services sector continues to carry the economy. The Manufacturing PMI contracted for a fifth straight month, rising from 48.5 to 48.8. The Services PMI rose to 57.0, up from 55.0, which points to strong growth.

USD/CAD Technical

  • USD/CAD is testing support at 1.3952. Below, there is support at 1.3923
  • 1.3986 and 1.4015 are the next resistance lines

Content 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 Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental and macroeconomic analysis, Kenny Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in major online financial publications including Investing.com, Seeking Alpha and FXStreet. Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

Latest posts by Kenny Fisher (see all)