USD/CAD remains capped below 1.3700 with the loonie favoured by a brighter market mood

Canadian Dollar trims some losses, favoured by a somewhat brighter market mood.
The US Dollar lost momentum after Trump postponed his decision to attack Iran.
The broader USD/CAD remains bearish after a nearly 2% decline in the last four weeks.

Guillermo Alcala FXStreet

The Canadian Dollar is trading higher against a weaker USD on Monday, trimming losses following a three-day sell-off, as a brighter market mood, coupled with high Oil prices, presents a more favourable backdrop for the CAD.

US President Donald Trump eased investors' fears earlier today, affirming that he will take two weeks to decide whether to get involved in the Middle East conflict, which has boosted hopes that a negotiated way to end the conflict is still possible.

The Greenback appreciated nearly 1% in the previous three days, favoured by its traditional safe-haven status in a rush for safety amid speculation about an imminent US attack on Iran, which would escalate the conflict into a full-blown regional war.

Higher Oil prices are supporting the CAD

The brighter market sentiment, however, has failed to undermine Oil prices, which remain steady near the $75% level amid fears that the conflict would disrupt Crude supply. Canada is one of the world’s main Oil exporters, and the Canadian Dollar tends to appreciate alongside Crude prices.

Later today, Canadian Retail Sales are expected to show that consumption slowed down to 0.4% in May from 0.8% in April although excluding cars, sales of all other products increased 0.2% after a 0.7% contraction in the previous month.

The broader USD/CAD trend remains bearish. The pair has lost nearly 3% in the last four weeks and is trading nearly 5% below April’s highs, as Trump’s erratic trade policy has sent the US Dollar tumbling against its main peers.

Economic Indicator

Retail Sales ex Autos (MoM)

The Retail Sales ex Auto data, released by Statistics Canada on a monthly basis, measures the total value of goods sold by retailers in Canada excluding the key sector of motor vehicles and parts. Changes in Retail Sales are widely followed as an indicator of consumer spending. Percent changes reflect the rate of changes in such sales, with the MoM reading comparing sales values in the reference month with the previous month. Generally, a high reading is seen as bullish for the Canadian Dollar (CAD), while a low reading is seen as bearish.

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