USD/CAD: Canadian Dollar Edges Higher Ahead of Retail Sales

12/21/2023

1 minute read

2023.12.21 05:57

MarketPulse

Canada to release retail sales today, GDP on Friday
US GDP expected to confirm estimate 5.2% gain

The Canadian dollar is slightly higher on Thursday. In the European session, is trading at 1.3324, down 0.19%.

Canadian Retail Sales, GDP Expected to Improve

It’s a busy end of the week for Canadian releases, with retail sales today and the GDP on Friday. Both indicators are expected to accelerate, which could give a boost to the Canadian dollar. The US releases third-estimate GDP for the third quarter, which is expected to confirm the previous estimate of 5.2%.

Canada’s retail sales are showing some strength, raising hopes that the Christmas season will be marked by strong consumer spending. In September, retail sales grew by 0.6%, which was the fastest growth rate in five months. The consensus estimate for October stands at 0.8% m/m.

The economy has not looked all that strong, although fears of a shallow recession failed to materialize as the economy posted weak growth in the third quarter. September GDP came in at just 0.1% m/m and October is expected to tick up to 0.2%.

The manufacturing sector is in a slump, as domestic activity has been weak and global demand for Canadian products has decreased. Manufacturing Sales slipped 2.8% m/m in October and the November data will be released on Friday.

Inflation has fallen to around 3% but is proving to be stubborn as the Bank of Canada tries to bring it back down to the 2% target. The BoC has signaled that it expects inflation to remain sticky and has projected an inflation rate of 3.5% through the middle of 2024. The central bank has paused rates three straight times and with a sputtering economy, there isn’t much reason to hike rates, which makes the BoC’s rate hike warnings appear rather hollow.

USD/CAD-4-Hour Chart