Canadian Retail Sales and Inflation did not live up to their advanced billing. Inflation was expected to cool slightly, from 2.8% in July to 2.7% in August, y/y. Today’s CPI reading of 2.2% y/y wasn’t just cool; it was cold. The more critical Core CPI was expected to offset a slightly softer headline number by rising to 1.8% y/y. It didn’t. It dropped to 1.5%. The Retail Sales report was another downer. August Retail Sales were expected to rise, but instead, the report was weaker than expected due to lower gasoline prices. USDCAD soared on the news, rising to 1.3119 from 1.3015. Prices have settled back to 1.3100. Today’s data may cause speculation that the Bank of Canada may delay a rate increase in January. However, it is only one report, and there are plenty more economic reports between now and January.
Elsewhere, China took a bite out of risk aversion when it released September Retail Sales data (Actual 9.2%, vs forecast 9.0% y/y) Industrial Production, (Actual 5.8% vs forecast 6.0% y/y) and Q/Q GDP (Actual 1.6% vs forecast 1.6%) The results were close enough to forecasts to provide some support to markets, particularly the Antipodean currencies. Even better, a series of Chinese officials and regulators added verbal support to markets.
In Europe, EURUSD dipped to a low of 1.1434 in early trading but prices rebounded into the New York open, and the single currency is trading at session highs. EURUSD was at 1.1610 on Tuesday suggesting it is vulnerable to a pre-weekend profit taking rally. The EU Summit ended without a breakthrough on Brexit and the special November Summit being shelved. There is talk of extending the UK’s departure.
USDJPY rallied on the improved risk tone but needs another rally in 10-year US Treasury yields to punch above 113.00.
USDCAD technicals are bullish while prices are above 1.2980. Today’s break above resistance in the 1.3070-1.3100 area targets a retest of 1.3380 if 1.3250 can be overcome. A move below 1.2970 would suggest further 1.2850-1.3200 consolidation. For today, USDCAD support is at 1.3070 and 1.3050. Resistance is at 1.3120 and 1.3150.
Today’s Range 1.3050-1.3120