Canadian dollar jumps on retail sales rebound

August 23, 2024 Share Print 0

The Canadian dollar is showing some strength on Friday. In the North American session, USD/CAD is trading at 1.3532 at the time of writing, down 0.60% on the day. The Canadian dollar is at its highest level since early April and is poised to post its third winning week in a row.

Canada’s retail sales slip in June, expected to bounce back in July

Canada’s retail sales report was a mix. In June, retail sales fell 0.3% m/m, confirming the initial estimate and following a May reading of -0.8%. However, the initial estimate for July jumped 0.6%, which would indicate a much-needed rebound in consumer spending.

Retail sales were down 0.5% in the second quarter and 0.4% in Q1, which would mark the weakest two quarters since 2009, outside the covid pandemic. The spike in July is likely due to the Bank of Canada’s quarter-point rate cuts in June and July, bringing down the benchmark rate to 4.5%. The BoC is expected to continue to trim rates as inflation has eased and the labor market shows signs of decline.

Step right up, Mr. Powell

The annual Jackson Hole meeting has begun and the highlight of the summit will be today’s speech from the host, Fed Chair Jerome Powell. The markets are all ears, although it would not be a surprise if Powell’s speech is little more than a cautious acknowledgment that inflation is moving in the right direction and that the Fed is poised to cut at the Sept. 18 meeting. The markets have fully priced in a rate cut at next month’s meeting, with the odds at 71% for a 25-basis point cut and 29% for a 50-bps cut, according to CME’s FedWatch.

There’s a strong chance that the Fed will deliver additional cuts before the end of the year, but recent employment data has been very weak and that could delay further rate cuts. The next employment report on Sept. 6 will be a key factor in determining the Fed’s rate path.

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USD/CAD Technical

USD/CAD has pushed below support at 1.3578 and is testing support at 1.3538. Below, there is support at 1.3478
There is resistance at 1.3628 and 1.3653

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Kenny Fisher

Market Analyst at OANDA

A highly experienced financial market analyst with a focus on fundamental and macroeconomic analysis, Kenny Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in major online financial publications including Investing.com, Seeking Alpha and FXStreet. Kenny has been a MarketPulse contributor since 2012.