Canadian Dollar Hits 3-week Low As Retail Sales Decline

Republished By Plato

Followers: 0

Canadian retail sales declined
US Manufacturing and Services PMIs accelerated
USD/CAD has climbed 200 points in one week

USD/CAD continued to rally today but has pared most of those gains. In Europe, USD/CAD is trading at 1.3527

Canada’s core retail sales drop

The markets were bracing for a weak Canadian retail sales report in February, and the numbers were indeed soft. Headline retail sales fell 0.2%, above the -0.6% gain but down from 1.6% in January. The core rate was even worse, with a decline of 0.7%, versus an estimate of -0.1% and a prior reading of 0.9%. The weak numbers extended the Canadian dollar’s woes, as USD/CAD is about 200 points higher since April 14th.

The March numbers could be far worse, with Statistics Canada forecasting a 1.4% slide in retail sales. It’s clear that the Bank of Canada’s aggressive tightening is dampening consumer spending, and high inflation has taken a bite out of disposable income. The BoC has paused at its last two meetings and left the benchmark rate at 4.50% and is monitoring the effects of its tightening cycle. If the economy decelerates, we can expect the BoC to continue to hold rates, as long as inflation doesn’t move upwards. Canada releases February GDP on Friday, with the economy expected to have expanded by just 0.2%.

In the US, Friday’s PMI reports for March beat the forecasts and indicated a slight acceleration in manufacturing and services. After six months of contraction, manufacturing pushed (barely) into expansion territory, rising from 49.2 to 50.4 (49.0 est.). Services rose to 53.5, up from 52.3 and above the estimate of 52.8 points. The strong numbers could reignite inflation and force the Fed to continue raising rates after the May meeting. Core inflation has been sticky and actually rose in March from 5.5% to 5.6% and we could see the core rate rise again in April.

USD/CAD Technical

There is resistance at 1.3577 and 1.3616
1.3487 and 1.3435 are providing support

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.

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