- Canada publishes retail sales and inflation that are set to rock the loonie.
- Contradicting expectations set the stage for a volatile reaction.
- The Canadian Dollar found some stability, for now, allowing the data to move it freely.
Canadian Inflation figures for June and Retail Sales for May are published simultaneously on Friday, July 20th, at 12:30 GMT. There are no parallel US publications, leaving the stage for these figures to move the USD/CAD.
Expectations from June's inflation figures are relatively upbeat: an acceleration in the Consumer Price Index from 2.2% YoY to 2.5% accompanied by a monthly increase of 0.3%, also quicker than 0.1% reported in May. Core CPI, which is no less critical, carries expectations for acceleration from 1.3% to 1.4% YoY, and also here, a monthly advance of 0.3%, after a slide of 0.1% in the previous month.
Energy prices are on the rise and so is headline inflation all over the world. The expected acceleration makes perfect sense and should not impact the loonie. However, the projections for an increase in Core CPI do not seem to have a substantial basis. In the recent past, core inflation fell short of expectations, including those of the Bank of Canada.
Core inflation is, therefore, a weak spot. High expectations may result in a disappointment and may weigh on the C$.
On the other hand, projections for retail sales are quite modest. After a plunge of 1.2% in April, headline sales are predicted to remain unchanged in May. However, after such a significant drop, an increase has higher chances than just stagnation.
Excluding autos, sales are projected to bounce by 0.5% after a slide of 0.1% beforehand. These expectations seem more logical and have better chances of being realized. Nevertheless, headline sales have a bigger impact on the loonie.
USD/CAD
All in all, core inflation has a probability of disappointing while headline sales may surprise to the upside. If these two things happen, the reaction may be choppy, yet limited. The figures can offset each other. For a more meaningful outcome for the USD/CAD.
How is the pair positioned? The Canadian Dollar is under pressure for quite some time but has found some calm in the summer sun. There has been no significant news related to trade, the most sensitive topic for Canada, which heavily relies on the US. No news is good news for the loonie, allowing it to recover.
The Bank of Canada recently raised rates and also maintained the bullish bias. On the other hand, oil prices are slipping.
All in all, the picture is balanced, allowing the USD/CAD to adequately react to the data.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD Weekly Forecast: Sellers gain confidence alongside the Fed Premium
GBP/USD Weekly Forecast: Pound Sterling stays vulnerable ahead of UK inflation data Premium
The Pound Sterling (GBP) booked the second straight weekly loss against the US Dollar (USD), sending the GBP/USD pair to the lowest level in a month below 1.3050.
Gold Weekly Forecast: XAU/USD holds above key support area after bearish action to start week Premium
Gold (XAU/USD) declined sharply in the first half of the week but regained its traction after coming within a touching distance of $2,600.
Bitcoin Weekly Forecast: Will BTC decline further?
Bitcoin’s (BTC) price fell over 6% at some point this week until Thursday, extending losses for a second consecutive week, as it faced rejection from a key resistance barrier.
RBA widely expected to keep key interest rate unchanged amid persisting price pressures
The Reserve Bank of Australia is likely to continue bucking the trend adopted by major central banks of the dovish policy pivot, opting to maintain the policy for the seventh consecutive meeting on Tuesday.
Five best Forex brokers in 2024
VERIFIED Choosing the best Forex broker in 2024 requires careful consideration of certain essential factors. With the wide array of options available, it is crucial to find a broker that aligns with your trading style, experience level, and financial goals.