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CANADA: Mildly Hawkish Reaction To Retail Sales Beat

CANADA
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  • An all around stronger than expected retail sales report carries most the market reaction although softer input prices (IPPI -0.8% M/M vs cons -0.2, IPPI ex oil -0.2% M/M) take a little of the edge off.
  • Can-US 2Y differentials have lifted 1bp since the data but at -68.3bps remain at the lower end of the range seen over the past month.
  • It's only been worth ~1bp on BoC-dated OIS for Oct as well, with 37bp vs 38bp of cuts priced.
  • USDCAD has dipped ~10 pips. At 1.3550 it remains above yesterday’s low of 1.3533 and support at 1.3520 (Fibo retrace of Aug 28 – Sep 19 correction). Resistance isn’t seen until 1.3622 (50-day EMA).
  • Retail sales were stronger than expected at 0.9% (cons and flash 0.6) in July after an upward revised -0.2% (initial -0.3), and were indicated at what appears to be a solid 0.5% M/M in the Aug advance considering a number of CPI goods items were weak in August.
  • Volumes back in July were also robust with 0.9% M/M (aided by auto sales bouncing back after June disruption), although that’s only enough for -0.2% annualized on a 3M/3M basis.
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  • An all around stronger than expected retail sales report carries most the market reaction although softer input prices (IPPI -0.8% M/M vs cons -0.2, IPPI ex oil -0.2% M/M) take a little of the edge off.
  • Can-US 2Y differentials have lifted 1bp since the data but at -68.3bps remain at the lower end of the range seen over the past month.
  • It's only been worth ~1bp on BoC-dated OIS for Oct as well, with 37bp vs 38bp of cuts priced.
  • USDCAD has dipped ~10 pips. At 1.3550 it remains above yesterday’s low of 1.3533 and support at 1.3520 (Fibo retrace of Aug 28 – Sep 19 correction). Resistance isn’t seen until 1.3622 (50-day EMA).
  • Retail sales were stronger than expected at 0.9% (cons and flash 0.6) in July after an upward revised -0.2% (initial -0.3), and were indicated at what appears to be a solid 0.5% M/M in the Aug advance considering a number of CPI goods items were weak in August.
  • Volumes back in July were also robust with 0.9% M/M (aided by auto sales bouncing back after June disruption), although that’s only enough for -0.2% annualized on a 3M/3M basis.