September USDCAD Rate Remains Stable in 1.35-1.36 Range

The Canadian dollar (CAD) has weakened throughout September, lagging behind other commodity currencies, which have been gaining ground against the US dollar. Meanwhile, USDCAD has been fluctuating within a 1-cent range, between 1.35 and 1.36. This decline has largely been driven by the strong US dollar last week. Additionally, mounting economic concerns are further weighing on the CAD, preventing it from rallying against the USD, despite other risk currencies making notable gains over the past two weeks. While Canada’s positive retail sales data today gave the CAD a brief lift of 30 pips, the currency quickly lost those gains, and USD/CAD resumed its upward trajectory for the day.

The Bank of Canada (BoC) recently reduced interest rates by 25 basis points, marking the third consecutive rate cut this year. With a total reduction of 75 basis points, this move comes as inflation slows toward the 2% BoC target. However, the latest jobs report revealed that unemployment has reached 6.6%, the highest level since 2017, excluding the pandemic period. This has added pressure on the Canadian dollar and sustained the USD/CAD ‘s bullish trend.

USD/CAD Chart Daily – Stuck Between MAs

The series of rate cuts reflects the BoC’s efforts to tackle the weakening economy, and market analysts now anticipate another 50 basis point cut at the next BoC meeting. Governor Macklem has indicated that the pace of rate cuts could accelerate if economic data continues to support it, though today’s retail sales report provided some positive signals. July’s new car sales surged by 2.2%, which contributed significantly to the overall retail sales increase.

Canada Retail Sales Data – July 2024 and Preliminary August 2024

• July retail sales increased by +0.9%, exceeding the +0.6% expected.
  • Preliminary estimate for July was +0.6%.
• August preliminary sales came in at +0.5%.
  • Excluding autos:
    • July +0.4% vs +0.3% expected.
    • Prior month was +0.3%.
• Sales Breakdown (July):
  • Seven out of nine subsectors showed positive growth.
  • Excluding autos and gas: sales rose +0.6%.
• Other Categories:
  • Furniture, electronics, appliances: +0.2%
  • General merchandise: +0.8%
  • Health and personal care: +1.2%
  • Gasoline stations, fuel vendors: -0.6%
  • Sporting goods, hobby, book, miscellaneous: 0.0%

Year-over-Year Retail Trade (Unadjusted for Inflation):

• Total retail trade: +0.9%
• Motor vehicle, parts dealers: +1.2%
• Building materials, garden equipment: -4.2%
• Food and beverage: +0.2%
• Furniture, electronics, appliances: -2.8%
• General merchandise: +3.8%
• Health and personal care: +5.8%
• Gasoline stations, fuel vendors: +2.8%
• Clothing and accessories: +0.2%
• Sporting goods, hobby, book, miscellaneous: -4.9%

Core sales, excluding autos, rose by 0.6%, with food and beverage stores experiencing a 0.8% rise, largely driven by a 1.2% jump in supermarket sales. Clothing sales also increased by 1.1%. On the downside, anything related to the housing sector continued to struggle, as building materials saw a 1.4% decline. The August preliminary retail data, which contradicts previous RBC cardholder trends, came in better than expected, surprising many market observers.

USD/CAD Live Chart