Summary:
- Canadian CPI Y/Y 2.3% vs 2.4% exp
- Retail sales comes in inline with forecasts
- Canadian dollar hands back earlier gains
The main economic data this afternoon comes from Canada with the release of the latest inflation and consumer spending figures. The CPI Y/Y for March rose by less than expected in increasing to 2.3% from 2.2% previously, with the consensus forecast calling for a 2.4% print. In terms of a “core” reading their are three seperate ones that Canada releases and whilst expectations are hard to find, there was potentially further disappointment here with the core trimmed figure dropping to 2.0% from 2.1% previously – the core common and core median remained at 1.9% and 2.1% respectively.
CPI rose but less than expected and the average of the 3 core CPI estimates actually dropped lower. Source: XTB Macrobond
At the same time as the inflation data there was there was also the most recent retail sales figures from Canada. In Y/Y terms these improved slightly but they remain low and if we consider the M/M reading it was flat at 0.4%. Household expenditure has also been dropping recently and overall this doesn’t pain the most positive picture for consumer spending.
Retail sales rose a little in Y/Y terms but it remains relatively low compared to most of this decade. Source: XTB Macrobond
In terms of market reaction the Canadian dollar has handed back its earlier gains following the release with the miss in inflation sinking the currency. The USDCAD could be on track to post a 3rd consecutive day of strong gains and price is now retesting an interesting level. Looking at the 8 and 21 EMAs on a D1 timeframe they are in a negative orientation (8 below 21) and this can be seen to be indicative of a downtrend. Price has rallied up to test the 21 EMA following the release and this could now be something to watch carefully.
USDCAD has pulled back to the 8 and 21 EMAS on D1. Source: xStation
A reversal here would see the prevailing downtrend remain in tact and today’s rally could be seen as a selling opportunity such as the one last week or back in December 2017. Alternatively should price push up through here then the trend may change and we could get a bullish cross (8 above 21) going forward – note the 8 EMA looks to be pointing higher at present.