Canadian dollar gets boost from sizzling retail sales
- Canada’s retail sales are higher than expected
- Fed’s Powell stays hawkish, signals two rate hikes
The Canadian dollar is almost unchanged in the North American session, trading at 1.3165.
Canada’s retail sales surprise to the upside
Canadian retail sales rebounded impressively in April, after declining in March. Headline retail sales jumped 1.1% m/m in April, after a -1.5% reading in March and crushing the consensus of 0.2%. Core retail sales was even stronger with a 1.3% gain, up from -0.4% and above the consensus of 0.4%. Canadian consumers may be grappling with high inflation and rising interest rates, but they were back in spending mode after a sour April.
Retailers are smiling at the increase in consumer spending but central bank policy makers are less pleased. The BoC has aggressively tightened in order to cool domestic demand and lower inflation. Consumer spending has been resilient despite high interest rates and the retail sales report will add pressure on the BoC to raise rates at the July meeting. A tight labour market has further complicated the battle against inflation and the BoC may have to adopt a “higher and longer” rate-hike cycle than it had anticipated.
USD/CAD Technical
- There is resistance at 1.3253 and 1.3329
- 1.3123 and 1.3047 are providing support lines
