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Setting up for CAD retail sales and CPI | TDS

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CAD retail sales and CPI

As the suggestion of the research team at TDS, the market reaction to the simultaneous release of CAD retail sales and CPI Canada will most likely driven by the retail sales report for July, where we are well below consensus From the market.

Key Quotes

“We expect the CPI is almost consensus that if he realized he should not have such a big impact on markets. Although the Bank of Canada’s recent penchant for risk to the outlook for inflation low, the data on economic growth (and therefore the output gap) is more important than publish CPI data. Note also that a calendar of US economic data vacuum allow markets are inspired entirely of national data.

Retail sales: Industry reports a drop in car sales is expected to drive another month of weak retail sales are forecast title to have fallen by 0.4 % m / m in July. Given an unchanged impression seasonally adjusted CPI for the month of July, the expected weakness in nominal retail sales will flow through the metric volumes. Softer consumer spending to start Q3 present a modest shift to what otherwise shaping up to be a strong quarter as the economy recovers from forest fires in northern Alberta that had endangered the activity in the second quarter (CAD retail sales).

CPI: August expected CPI inflation to firm on higher energy prices and a modest rebound in the basic components. We look overall CPI rise 0.2% m/m , leading the annual inflation rate above 1.4% y/y vs. 1.3% y/y in July. The underlying index probably increased by 0.2 % m/m after a more modest increase of 0.1 % in July, leaving the core inflation rate stable at 2.1 % y/y. If realized, the projection August would be consistent with an underlying inflation rate of 2.1% in Q3, exceeding the Bank of Canada MPR July projection of 2.0%. That said, the August readings offers limited implications for the prospects of the Bank of Canada in light of the Bank’s concern about downside risks arising from the disappointment standard on export growth.

Foreign Exchange

We seek external drivers to continue to shape the outlook for the loonie over the coming sessions. In fact, the winery hawkish Fed has failed to convince markets that a rise in December, when nicking the risk rally. This suggests the relief rally in risk assets should continue to weigh on the US currency ahead of the weekend. That said, a softer reading in Canadian publications CAD data lag could see at intersections with high-yielding currencies (AUD and NZD as) leading gains in the majors.

For USDCAD, our fair value models high frequency suggest that the pair is overrated, pointing to a move back to 1.30. Market positioning also suggests that the short squeeze may persist, indicating more pressure on USDCAD over the coming days. That said, the risks of the US elections soon drift into the radar screens of investors, limiting the decline of the US currency, so look to scale back on long USDCAD positions on dips below 1.30.”

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