Summary:
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Canadian core CPI inflation inches higher to 2% YoY
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A firm beat offered by retail sales reading
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USDCAD slumped towards 61.8% Fibo level in the aftermath of data release
The sole top-tier macroeconomic readings scheduled for today are already behind us. The Canadian price growth accelerated further beyond the Bank of Canada inflation target. The retail sales reading released simultaneously provided more fuel for CAD bulls. In turn we saw USDCAD plummet following the publication.
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The average of 3 core CPI measures ticked higher to 2% YoY. Source: XTB Research, Macrobond
The headline measure of the Canadian CPI inflation ticked higher just as expected. However, what markets did not expect was the scale of advance. Market consensus pointed for a move from 2.2% YoY in May to 2.3% YoY in June while the actual reading saw jump to 2.5% YoY. Moreover, the average of 3 core measure also ticked higher from 1.9% YoY to 2% YoY ( expected 1.9% YoY). The biggest increase was seen in food prices while recreational and household operations prices declined the most. What is even more encouraging is the fact that energy prices declined in June therefore an increase cannot be accounted to the most volatile group of goods.
Canadian retail sales bounced in May signalling that the demand within the economy is strong. Source: XTB Research, Macrobond
Moving to the retail sales report we have also been offered a positive surprise. Namely, the headline reading was expect to show a 1% MoM advance while the actual data saw a 2% increase. Investors were also provided with a beat when it comes to the core measure as it advanced 1.4% MoM while the markets expected just 0.5% MoM increase. The biggest advance was seen in car sales while supermarkets category dragged the reading the most.
USDCAD slumped following the release of the Canadian data pack. Source: xStation5
Taking a look at the USDCAD chart it is hard to ignore a huge decline resulting from the release of inflation and retail sales reading. Beats offered in each category provided CAD bulls with new fuel. In turn we saw the pair plunging towards the 61.8% retracement level of the major downward impulse started in May 2017. In case the pair manages to break below the mentioned Fibo level we may see a prolonged downward move towards the support zone (red colour on the chart above). However, one should keep in mind that the latest comments from the US President Donald Trump has greatly affected the USD valuation and if we are to see more of these the technical outlook may also change.
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