CAD: Data risk will intensify with the release of retail sales and CPI reports – RBC CM

Research Team at RBC Capital Markets, suggests that the data risk for CAD will intensify to end the week with the release of the CA August retail sales and September CPI reports.

Key Quotes

“RBC is forecasting a below-consensus print of -0.1%m/m for headline retail sales (cons. 0.3%), as a drop in August unit auto sales is projected to send sales at motor vehicle dealerships down 1.2% in the month while steady gasoline prices are expected to result in only a 0.2% increase in nominal gas station receipts. Core sales are expected to rise by 0.2%m/m helped by rising employment and the childcare benefits that were distributed in the second half of July.

We forecast an above-consensus print of 1.5%y/y for headline CPI (cons. 1.4%), as firmer gasoline prices in September were much stronger than the 8% decline a year ago. The trend of low energy prices from a year ago falling out of the y/y headline CPI rate is expected to intensify going forward and push CPI growth toward 2% potentially by the end of this year. The retail sales release takes on increased importance in light of Wednesday’s dovish comments from BoC Governor Poloz, as consumer spending was flagged as the primary engine of growth in 2016 and 2017. With the tone of the MPR placing a short-term floor in USD/CAD near 1.3050, attention now shifts up to resistance between 1.3280 and 1.3296 through these releases.”