USDCAD & USOIL, H1
USDCAD spiked up to fresh 1-year highs of 1.3381 from 1.3267 on the weaker than expected data duo of CPI and Retail Sales. Canada Retail Sales plunged 1.2% in April (m/m, sa) following a revised 0.8% gain in March (was +0.6%). Meanwhile, Canada CPI grew at a 2.2% y/y pace in May, matching the 2.2% rate of increase in April to undershoot expectations for an acceleration in the annual CPI growth rate (we saw +2.5%).
While the BoC can take the CPI report in stride, with the 1.9% seen across all three core measures close to the BoC’s 2% target and the total CPI index holding above 2%, the Retail Sales report may warrant closer scrutiny given the moderation in consumption evident in the Q1 GDP. But poor April weather (Ontario saw an ice storm in mid-April) may explain much of the April Retail Sales drop, allowing the BoC to look past April Retail Sales. That being said, April GDP is going to struggle to show any growth given the 1.4% drop in retail sales volumes that joins declines in manufacturing and wholesales. The 2-year GoC swung to 1.79% from 1.85% ahead of the data, leaving a 3 bps drop where there was a 3 bps gain (relative to Thursday’s close). The S&P/TSX 60 remains firmer in pre-market action, following alongside gains on Wall Street futures.
The USDCAD retested the round 1.3400 level, after breaking yesterday’s peak at 1.3334. The pairing had been on the decline overnight on the back of firmer oil prices, bottoming at 1.3264 in London. In contrast to Canadian Dollar’s weakness, USOIL popped to 3-week highs of $67.91 from near $66.50. The rally comes as many in the market were expecting at least a 1.5 mln bpd increase in output, while OPEC agreed to increase production by 1.0 mln bpd at their meeting in Vienna.
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