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Further Dovish Extension On Retail Sales and Input Cost Inflation

CANADA
  • USDCAD has pushed to a new session high of 1.3725 on an all-around disappointing retail sales report and tepid input cost inflation in June.
  • It’s a step closer to resistance at 1.3755 (Jul 2 high), pulling further away from the bear threat.
  • 2Y Can-US yield differentials fall further, down 1.5bps since the data to -78bps at what would be the lowest close since Jun 24.
  • Highlighting the divergence seen this week, 2Y GoC yields are 5bps lower vs Tsy yields +7.5bps since Canadian CPI and US retail sales landed on Tuesday.
  • Canadian retail sales disappointed across the board, -0.8% M/M (cons -0.6) in May after a downward revised 0.6% (initial 0.7%) in April and with the June advance indicated at -0.3% M/M.
  • It adds to net softer activity data when manufacturing sales were +0.4% M/M but wholesale sales ex energy were -0.8% M/M.
  • Industrial product prices meanwhile were flat in June, albeit after an upward revised 0.2% (initial 0.0) in May. IPPI ex petroleum was also soft 0.1% but follows a string of strong readings averaging 0.9% M/M over the past four months.

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