The Canadian dollar appreciates after strong retail sales

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The Canadian dollar started the week with gains. USD/CAD is trading at 1.2852 during the North American session, down 0.54% on the day.

Canadian retail sales sparkle

Canada released June retail sales on Friday, and the data was stronger than expected. Retail sales jumped to 2.2% from 0.7% in May (1.6% exp.). Core retail sales also accelerated, gaining 1.9% from 1.1% in May (1.6% exp.). The June figures mark a fifth consecutive increase and point to solid consumer spending.

The Bank of Canada will take a long break after its mega-hike of 1% earlier in July. The next meeting will not take place before September 7e which will give the central bank ample time to monitor economic data and consider its next move. We can expect further rate hikes in the second half of the year, with inflation reaching 8.1% in June, compared to 7.7% in May.

The question facing policymakers is how much to tighten in upcoming meetings. There are serious concerns about a possible recession, but strong retail sales data show consumers are spending despite inflation and higher rates, meaning the BoC may estimate the economy is strong enough. resilient to absorb additional large increases to curb inflation. .

Following the inflation release last week, BoC Governor Tiff Macklem said inflation is expected to remain above 7% for the rest of the year, which is “painfully high”. Macklem added that the bank is accelerating its interest rate hikes to curb inflation, and will raise rates again “rather quickly.”

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USD/CAD technical

  • There is resistance at 1.2921 and 1.3019
  • USD/CAD has support at 1.2817 and 1.2719

This article is for general information purposes only. It is not investment advice or a solution for buying or selling securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for everyone. You could lose all your deposited funds.

Kenny Fisher

A highly experienced financial markets analyst specializing in fundamental analysis, Kenneth Fisher’s daily commentary covers a wide range of markets including forex, equities and commodities. His work has been published in several major online financial publications, including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.

Kenny Fisher
Kenny Fisher

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