The CAD to USD rate has been finding support at MAs and today we saw another bounce in USD/CAD after the retail sales report from Canada, which was positive. Sales showed a 0.9% increase in December, however, expectations for January are negative, with an anticipated decline of 0.4%.

The Canadian retail sales report for December showed a mixed performance, with headline sales rising more than expected and core sales increasing slightly less than predicted. Despite the mixed results, the Canadian dollar’s reaction to this data was not substantial. But, this is because the US weekly jobless claims data which was released at the same time revealed lower-than-expected initial and ongoing claims, suggesting positive labor market conditions. This release had a relatively minor impact on market sentiment compared to other major economic indicators.

Following the release of the economic data, the USD/CAD exchange rate experienced a 50 pip increase. However, the magnitude of this movement was not significant, as the report is often considered secondary in terms of its impact on currency markets. USD/CAD popped above the 1.3500 mark, indicating a level of significance in the market. We are closely monitoring this level for potential breakout or reversal patterns.

Canadian December 2023 Retail Sales and January Advance Estimate

• December Retail Sales:
  • Retail sales for December increased by 0.9%, slightly exceeding the projected growth of 0.8%.
  • This growth marks a significant improvement from the previous month’s decline of 0.2%.
• Excluding Autos:
  • Excluding auto sales, the growth was slightly lower than expected, coming in at 0.6% instead of the projected 0.7%.
  • However, this still represents an improvement from the previous month’s decline of 0.5%.
• Quarterly Sales Performance:
  • In the fourth quarter, sales were up by 1.0%, compared to the previous month’s decline of 0.6% when excluding auto and petrol sales.
• Auto Sales Performance:
  • Auto sales increased by 2.2% year-on-year in 2023, indicating positive growth in this sector.
• Advanced Estimate for January:
  • The advanced estimate for January suggests a decline of 0.4% in retail sales, indicating potential weakness in the retail sector for the beginning of the year.
• Sectoral Performance:
  • Strength was observed in sectors like food & beverage (+1.5%), general merchandise (+2.8%), and supermarkets (+1.8%).
  • Weakness was noted in sectors such as electronics and furniture (-2.7%) and e-commerce (-3.6%).
• Market Reaction:
  • The Canadian dollar experienced some downward pressure in response to the weaker-than-expected January retail sales estimate.
  • Additionally, the USD/CAD exchange rate was influenced by a robust US jobless claims report released simultaneously.

While December’s retail sales showed improvement, the weaker January estimate and other economic factors influenced market sentiment and currency movements, particularly concerning the Canadian dollar against the US dollar.

USD/CAD Live Chart