Resilient Core Retail Sales To Curb Canadian Dollar Weakness

- Canada Retail Sales to Hold Flat After Expanding for Last Four Consecutive Month.

- Sales Excluding Autos to Rise for Fifth Straight Month.

Trading the News: Canada Retail Sales

Even though Canada Retail Sales are projected to hold flat in December, a pickup in core spending may curb the near-term rebound in USD/CAD and keep the exchange rate within a narrow range as it highlights an improved outlook for growth and inflation.

What’s Expected:

Why Is This Event Important:

Waning demand for large-ticket items may keep the Bank of Canada (BoC) on the sidelines as the central bank warns ‘negative wealth and income effects will persist’ over the policy horizon, and Governor Stephen Poloz and Co. may preserve the highly accommodative policy stance throughout 2017 in an effort to encourage a stronger recovery. Nevertheless, signs of stronger consumption may prompt the BoC to soften its cautious tone, and the central bank may sound more upbeat over the coming months as ‘the global economy is strengthening largely as expected and prices of some commodities, including oil, have risen.’

Expectations: Bullish Argument/Scenario

Easing price pressures paired with the ongoing improvement in the labor market may fuel an unexpected pickup in retail spending, and a positive development may heighten the appeal of the Canadian dollar as it pushes the BoC to gradually move away from its accommodative policy stance.

Risk: Bearish Argument/Scenario