• Canadian retail sales M/M: +0.1% vs +0.9% exp 
  • Core reading M/M: +0.3% vs +0.9% exp
  • USDCAD rises after holding key support at 1.2665

With the US celebrating a Bank holiday for thanksgiving the focus of this afternoon’s session is on Canada with a smaller than expected increase in retail sales seeing the Canadian dollar dip lower. There has been a strong rise observed in retail sales data since early 2015 but the latest disappointment is threatening to end the uptrend.

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 The drop in Canadian retail sales is threatening to end the recent run of rises. Source: XTB Macrobond

Despite the drop, a steady rise in household expenditure should be seen as a positive sign for the Canadian economy. There has been a fairly good historical correlation between this and retail sales and as long as household expenditure holds up then retail sales shouldn’t decline too far. 

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 Household expenditure remains robust despite the drop in retail sales. XTB Macrobond

A rise of 0.1% in M/M terms is well below the 0.9% expected and although the prior reading was revised up to -0.1% from -0.3% previously it is fairly safe to say the data point has disappointed a little.

The core reading was slightly stronger at +0.3% M/M but again, compared to the +0.9% expected this is also on the soft side. Again, however, the prior reading was revised higher to -0.4% from -0.7% previously. 

The reaction in the market has seen a swift drop in the Canadian dollar with USDCAD popping higher by around 35 pips in the half hour that followed the release. Longer term the pair broke below a rising trendline from the September lows yesterday and now 1.2665 is a potentially key support zone. 

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 USDCAD has popped higher following the release but after breaking a rising trendline yesterday remains vulnerable to further declines. Source: xStation