Canadian Retail Sales: Modest expectations, big impact?

Canada releases its Retail Sales report with a lag: around 50 days after the month end, whereas other countries publish the critical consumption data around two weeks after the reported month draws to a close. In addition, the publication usually coincides with the release of the inflation report. CPI figures are more up-to-date and also carry more weight in the markets. The Bank of Canada is mandated to ensure price stability.

The upcoming Retail Sales publication for December, due on February 22nd, has the entire stage to itself. Moreover, the expectations are relatively modest: a month over month gain of 0.3% only slightly higher than in November and not a significant change in absolute terms. Back in November, projections stood at an increase of 0.7%, setting the scene for a downside surprise.

December's report can go either way: a more significant rise or an outright squeeze in the volume of sales. The holiday month of December can be tricky for statisticians. Retail Sales excluding automobiles will likely play second-fiddle. Back in November, they jumped by 1.6%, a much more volatile result in comparison to the headline number.

The US releases the weekly Jobless Claims update at the same time, but this has not been a meaningful market mover for the dollar, thus leaving the Canadian publication as the primary mover of the USD/CAD pair upon the announcement.

The USD/CAD has experienced higher volatility of late, similar to other currencies. The turbulence in stock markets and the swings in oil prices have influenced the pair. 

The Market Impact tool shows the potential

• CAD Retail Sales (MoM)(Dec)
• Primary currency pair: USD/CAD
• Tradable Positive Trigger: +1.2
• Tradable Negative Trigger: -1.2

In the last five releases, the USD/CAD moved, on average, 19.8 pips in the 15 minutes after the release and 50 pips in the 4 hours after the release.

The previous release has a surprise measured in a -0.66 deviation causing the USD/CAD to move 136 pips in the following 15 minutes after the release and 153.5 pips in the next 4 hours.

If it comes out lower than expected at a deviation of -1.2 or less, the USD/CAD may go up 43 pips in the 15 minutes after the release and 79 pips in the following 4 hours. If it comes out at higher than expected with a deviation of +1.2 or higher, the USD/CAD may go down by 52 and 111 pips in the same time horizons.

Support levels for a long commitment are to be found around 1.2680 and further below at 1.2650 and 1.2600 accordingly to the Confluence Indicator. Resistance is noted at 1.2720, 1.2755 and 1.2805.

Update: Canadian retail sales dropped by 0.8% and the deviation was -1.29. This sent USD/CAD higher exactly as expected, above downtrend resistance.

CAD quoted pairs showing the Canadian dollar unanimously bid in recent session are changing to much less CAD bullish stance  accordingly to FXStreet's Bullish Percentage Index. As such, a release which surprises the market positively may lead to a stronger price move than a weak number.

Here is the Market Impact Studies Users Guide.

Here are the recent releases with the consensus, the actual result, and the deviation:

Here is the Deviation Impact of Canada's retail sales report: 

Follow the Canadian retail sales live here