CAD: Data risk steps up with CPI and retail sales – RBC CM

Sue Trinh, Senior Currency Strategist at RBC Capital Markets, suggests that the data risk will increase substantially today for the CAD with the simultaneous release of the July retail sales and August CPI data.

Key Quotes

“RBC is matching the consensus call for a 0.1%m/m increase in retail sales, reversing a 0.1% decline in June. Core sales are expected to offset declines in auto sales and nominal receipts at gasoline stations, with volumes expected to rise 0.2%. This would be consistent with our forecast that real consumer spending will rise an annualized 1.7% in Q3 following a 2.2% increase in the prior quarter.

We are also matching consensus expectations for a 1.4%y/y print for headline CPI, with a smaller drop in gasoline prices relative to a year ago accounting for the marginal rise from the prior 1.3% print. The y/y decline in gasoline prices is expected to moderate further in September, helping to push headline CPI closer to the ~1.7%y/y level where the BoC sees underlying inflation. With the recent rejection of a key double top at 1.3219 keeping USD/CAD within a multi-month consolidation pattern, a re-test of the bottom end of this pattern (support near 1.2900) is expected to transpire.”