USD/CAD steady after Cdn. CPI, US retail sales

The Canadian dollar is showing limited movement on Tuesday. In the North American session, USD/CAD is trading at 1.3687, up 0.03% on the day at the time of writing.

Canada’s CPI lower than expected

Canada followed the US and posted a better-than-expected inflation report for June. The annual inflation rate fell to 2.7% in June, down from 2.9% in May and below the market estimate of 2.9%. This matched the three-year low in April. Gasoline prices fell sharply while food prices rose. Monthly, CPI declined in June by 0.1%, down from 0% in May and below the market estimate of 0.1%. This was the first decline since December 2023. Interestingly, the US also posted a 0.1% decline in the June CPI report.

Core inflation, which didn’t benefit from the sharp decrease in energy prices, ticked higher to 1.9% y/y, up from 1.8% in May and above the forecast of 1.6%. Monthly, core inflation declined by 0.1%, sharply lower than the 0.6% gain a month earlier and below the forecast of 0.4%.

The Bank of Canada will be pleased with the inflation report, as headline inflation declined and core inflation remains below the 2% target. The central bank meets on July 24 and the markets have raised the odds of a rate cut at that meeting to 88%, up from 82% before the inflation release. Canada releases retail sales on Friday, the last critical data prior to the rate decision.

US retail sales softer than expected

US retail sales dipped to 2.3% y/y in June, down from 2.6% in May but higher than the forecast of 2.1%. Monthly, retail sales were unchanged in June, down from a revised 0.3% in May and matching the market estimate. This was the second time in three months that retail sales were unchanged, pointing to weakness in consumer spending.
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USD/CAD Technical

• USD/CAD tested resistance at 1.3704 earlier. Above, there is resistance at 1.3726
• There is support at 1.3668 and 1.3646

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