USD/CAD is showing some buying momentum today after being bearish and lowering highs since May. The pair is now up about 50 pips to 1.3220 seconds after the release of the Canadian retail sales report, close to today’s highs. Prior to the data release, the currency pair was already on a bullish course for the day as the US dollar was broadly strong. USD/CAD continued its rally after a report was released showing sales up 0.2% against expectations of 0.5%. Additionally, preliminary data for June shows no change (flat) in retail sales.
Interestingly, the Canadian dollar remains weak despite WTI crude gaining more than $1 today and closing the week at $76.895, its highest since April. The market is now pricing in a 75% chance that the Bank of Canada will keep rates unchanged at its Sept. 6 meeting, up from a 70% chance last time before the retail sales data was released. This suggests that investors are becoming more confident that the BOC may keep interest rates on hold.
rise of USD/CAD Despite the strength in the oil market and the increased likelihood that interest rates will stay on hold, the pair could indicate that Canadian consumers may be feeling the impact of higher interest rates, as reflected in the retail sales data. Therefore, I am considering buying this pair of pullbacks for less.
Canada May 2023 Retail Sales Report
- May retail sales forecast +0.2% vs +0.5%
- Prediction was +0.5%
- Previously +1.1% (revised to +1.0%)
- Excluding automobiles 0.0% vs forecast +0.3% (previously +1.3%, revised +1.2%)
- Looking ahead in June 0.0%
- Sales YoY +0.5% YoY +1.4%
At the time of this report, core sales were up for the fifth straight month, so the flat numbers aren’t a huge red flag, but higher interest rates are definitely starting to have an impact.
The report provides valuable insight into consumer spending patterns and how pressure on consumers is impacting different sectors of the economy. Data show a notable 6.9% increase in spending at supermarkets, suggesting that consumers are prioritizing essentials such as groceries. These changes in spending behavior can be a result of economic pressures and uncertainties, causing people to focus on essential purchases.
On the other hand, spending on furniture and building materials has declined, likely as consumers refrain from purchasing non-essential and high-value items in response to the challenging economic environment. Interestingly, the data also shows that new/used car spending is high despite the tighter overall consumer spending. This may be due to factors such as attractive financing offers and potential demand for cars.
Moreover, the electronics and clothing sectors are holding up relatively well, at least before inflation is adjusted. This resilience may be driven by factors such as ongoing technological advances and consumers’ desire to maintain a sense of normalcy and personal style despite economic hardships.
USD/CAD Live Chart
USD/CAD
