Canada Retail Sales
Canada’s Retail Sales report showed a larger-than-expected decline in May, with household spending falling 1.3% following the 1.7% rise the month prior.
Canada Economic Calendar – July 19, 2024
A deeper look at the report from Statistics Canada showed that ‘sales were down in eight of nine subsectors, led by decreases at food and beverage retailers,’ while core retail sales fell ‘1.4% in May on lower receipts at all core retail subsectors.’
The report also revealed that ‘the sole increase in retail sales in May was observed at motor vehicle and parts dealers (+0.8%), up for the third time in four months,’ while retail e-commerce spending was ‘down 3.6% to $3.9 billion in May, accounting for 5.9% of total retail trade, compared with 6.1% in April.’
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USD/CAD Chart – 15 Minute
Chart Prepared by David Song, Strategist; USD/CAD on TradingView
USD/CAD climbed to a session high of 1.3748 following the decline in Canada Retail Sales, but the market reaction unraveled as the exchange rate closed at day at 1.3728. Nevertheless, the Canadian Dollar continued to weaken against its US counterpart in the week ahead, with USD/CAD pushing above the June high (1.3792) to close the week at 1.3835.
Looking ahead, the update to Canada’s Retail Sales report is anticipated to show another contraction in June, with household spending projected to fall 0.3% following the 0.8% decline the month prior.
Signs of a slowing economy may encourage the Bank of Canada (BoC) to pursue a more accommodative policy as Governor Tiff Macklem and Co. acknowledge that ‘broad inflationary pressures are easing,’ and a dismal development may produce headwinds for the Canadian Dollar as it fuels speculation for lower interest rates.
However, a better-than-expected Retail Sales report may push the BoC to the sidelines following the back-to-back rate-cuts, and a rebound in household consumption may generate a bullish reaction in the Canadian Dollar as it raises the central bank’s scope to keep Canada interest rates on hold.
Additional Market Outlooks
AUD/USD Rally Pushes RSI Towards Overbought Territory
US Dollar Forecast: USD/JPY Rebound Unravels Ahead of Fed Symposium
Canadian Dollar Forecast: USD/CAD Susceptible to Test of July Low
GBP/USD Forecast: Test of Weekly High in Focus
--- Written by David Song, Strategist
Follow on Twitter at @DavidJSong
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