USD/CAD bounces back to 1.3700 after weak Canadian Retail Sales data
|- USD/CAD recovers to near 1.3700 as the Canadian Retail Sales surprisingly contracted by 0.1% in March.
- Weak Retail Sales data would prompt expectations of early rate cuts by the BoC.
- The US Dollar struggles for a strong recovers due to weak S&P Global PMI report for April.
The USD/CAD pair witnesses strong buying interest and rises to 1.3700 as the Statistics Canada has posted weaker-than-expected Retail Sales data for March. Sales at retail stores contracted at a slower pace of 0.1% against 0.3% in February. However, investors forecasted that Retail Sales will rose by 0.1%.
The Retail Sales is a leading indicator of consumer spending that signifies households’ demand. Lower Retail Sales suggest weak demand by households, which force factory owners to reduce prices of goods and services at their factory gates. This leads to a decline in the consumer price inflation, which would allow the Bank of Canada (BoC) to start reducing interest rates earlier. Currently, financial markets anticipate that the BoC will start reducing interest rates from the June meeting.
Meanwhile, the US Dollar struggles to recover above the immediate resistance of 105.80. It seems that investors have not shrugged off the impact of weak S&P Global preliminary PMI report for April, released on Tuesday.
The S&P PMI report showed that the Manufacturing PMI drops below the 50.0 threshold and the Services PMI falls sharply to 50.9.
Going forward, the US Dollar will dance to the tunes of the Q1 Gross Domestic Product (GDP) and the core Personal Consumption Expenditure Price Index (PCE) data for March, which will be published on Thursday and Friday. The economic data will impact speculation for timing of rate cuts by the Federal Reserve (Fed), which are currently expected from the September meeting.
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