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USDCAD gains after Canadian retail sales fall


  • Canadian core retail sales M/M:  -0.6% vs -0.4% exp

  • BOC’s Poloz: Oil price drop will knock about 0.4% off GDP

  • USDCAD moves up near highest level of the day in reaction


The main piece of economic data this afternoon from North America has delivered a downbeat assessment of consumer spending in Canada and caused some selling in the Canadian dollar. Retail sales figures for November showed a larger than expected decline in month-on-month terms, coming in at -0.9% vs a median forecast of -0.6%. The prior reading was revised higher to +0.3% from +0.2% previously, but it still doesn’t fully offset the decline in the latest data. One area of particular interest is the level of total Cannabis sales, which came in at C$54M in November and reflects an additional component on consumer spending that was hitherto unrecorded in the data.

Canadian retail sales continued to decline according to the latest date, with both the headline and the core reading not far off flat in year-on-year terms. Source: XTB Macrobond


Taking out car sales to arrive at a core reading doesn’t improve the outlook unfortunately, with the M/M core retail sales for November falling by 0.6% below an expected -0.4%. There was a revision to the prior reading here too, but unlike in the headline the alteration actually reflects even worse on the recent data. The prior reading now stands at -0.2% M/M, down from 0.0% previously and providing a bit of a buffer on the latest read.  

The Canadian dollar has pulled back since the data hit but remains higher on the day against most of its peers. Source: xStation


Around the same time as the data hit, Bank of Canada (BOC) Governor Poloz was peaking in Davos from the World Economic Forum. The following comments are taken from the speech:

  • Oil price drop will knock about 0.4% from GDP

  • Markets are understandably concerned about the US-led trade war

  • If that’s resolved it will be an extra lift

  • It would be a disaster if it escalated

  • We’re watching how the economy responds to oil, which is bouncing back

  • Pace of future hikes will be data dependent   


The comments on the trade situation are interesting but hardly groundbreaking with the remarks relating to the impact of Oil prices on Canadian growth and the bank’s data dependence are the most relevant for the Loonie. Given that Oil still remains relatively low even after the strong recent bounce and the soft retail sales figures it’s fairly safe to say there’s little here to suggest any more hikes anytime soon.

USDCAD has moved higher after the data but the market still remains below potential resistance around the 38.2-41.4% fib retracement of the larger decline from 1.3365-1.3380. This region could be seen as a key swing level and unless price breaks above there then more downside can be expected. Source: xStation


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