Canadian dollar eyes retail sales

The Canadian dollar is showing little movement on Friday. In the European session, USD/CAD is trading at 1.3845 at the time of writing, down 0.07%.

It has been a relatively quiet week for the Canadian dollar, and even an oversized 50-basis point rate cut from the Bank of Canada failed to shake up the Canadian currency. The jumbo cut was priced in by the markets, as inflation has fallen below the BoC’s 2% target and the economy remains week despite the central bank’s gradual rate cuts. This week’s cut was the fourth in as many meetings and the BoC is hoping that the large rate cut will boost economic activity.

BoC’s Tiff says monetary policy has worked

BoC Governor Tiff said after the rate meeting that “monetary policy has worked” and that both headline and core inflation have come down. Does Tiff’s pat on the back mean that the BoC will revert back to modest cuts of 25-bp increments? Not necessarily – Tiff said that the rate move should “contribute to a pickup in demand”, and if the economy remains sluggish and consumer spending doesn’t improve, the BoC could repeat a 50-bps move in December.

The US will release durable goods orders and UoM consumer sentiment later today. The manufacturing sector has contracted for four straight months and core durable goods orders are expected to fall 1% in September, after no change in August. The UoM consumer sentiment index is expected to fall to 68.9 in October, compared to 70.1 in September. Consumers are unhappy about high inflation and there is uncertainty over the US election, which is a dead heat with just 10 days to the election.

USD/CAD Technical

• USD/CAD is testing support at 1.3846. Below, there is support at 1.3823
• There is resistance at 1.3879 and 1.3902

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