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Strong CAD retail sales indicative of a recovering consumer

Posted on: June 22, 2017

In the first of two big data releases this week Canadian Retail Sales smashed expectations at 0.8% compared to 0.3%. The current run from January to April matches the best YTD start ever for Canadian Retail Sales. Tomorrow is another big one with May CPI, can we finish the week with a one-two punch? If so, expect to see the chances of a July rate hike in Canada get another bump, as we went from 40% to 54% probability of a 0.75bp hike after the Retail Sales number.

Oil remains a thorn in the side of CAD dollar, although the support band above $42 is holding for now. Will be interesting to see what the Bank of Canada does if the data continues to run hot while oil slumps. Very strong Canadian retail sales data sent USDCAD from 1.3300 to trade to a bottom of 1.3250. Technically speaking, resistance remains up at 1.3340 near the 200-day and support comes in around 1.3220/30. With Canadian data out of the way, Fed commentary will now play a focus today and tomorrow, with FOMC members Powell (centrist), Mester (hawk) and Bullard (dove) all due to speak on the topic of US monetary policy and fostering economic growth.

Across the pond, the RBNZ left its cash rate unchanged at 1.75%, in line with expectations, and continuing to suggest that monetary policy will remain accommodative until late 2019. The statement downplayed strength in inflation despite recent strength in NZD, and the central bank noted that a weaker NZD is preferable to support export growth.

In other news, Warren Buffets Berkshire Hathaway has agreed to acquire $400 million of Home Capitals common shares and provide a $2 billion line of credit. While not entirely relevant on a currency front, this move will likely improve outsider sentiment on the health and sustainability of the Canadian housing market.

  • Yesterdays NA Range: 1.3273 – 1.3348
  • Asia Overnight Range: 1.3317 – 1.3336
  • London Overnight Range: 1.3249 – 1.3338

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