Date: 20 Jul 2018

Today sees the release of Canadian Retail Sales data for May and CPI for June. In the light of the fact that when the Bank of Canada (BoC) raised interest rates by 25 basis points last week, a move that had been expected by markets, it also alluded to the possibility of the need for further moves, this data might attract a greater degree of market attention than might ordinarily be the case. So what might traders expect? On Retail Sales, traders who follow the Canadian dollar (USDCAD, GBPCAD, EURCAD, CADJPY) may recall that the April figure was dismal with a 1.2 per cent drop month-on-month. A snapback in May might therefore be expected with Canada’s RBC Capital Markets forecasting a rise of 0.8 per cent. Canada’s TD Securities is even more bullish with a prediction of a 1.3 per cent increase. On the issue of CPI, both firms expect an uptick in inflation in June. Analysts at RBC Capital Markets are expecting a 0.1 per cent rise month-on-month which will produce a year-on-year increase of 0.3 per cent from May’s 2.2 per cent reading to produce a headline 2.5 per cent CPI print for June. In contrast TD Securities only sees Canadian June CPI at 2.3 per cent year-on-year but does acknowledge that the risks are “skewed to the upside as the prior weakness in core categories unwinds.” Dutch bank ING wonders if “any uptick in [Canadian] inflation – as well as a bounce back in retail sales (following a dismal April reading) – could see CAD markets reconnecting with the hawkish BoC story.” That will be for traders to decide. Both sets of data will be released at 1330h UK time.

Written by Neal Kimberley, External Currency Analyst.