BREAKING: Canadian core retail sales well below expectations🚩USDCAD reacts

Canadian retail sales came in 1% MoM in line with expectations (after -0.8% decline in July) but core sales came in 0.7% MoM well below 1.3% exp. but higher than -1.2% in July. The USDCAD pair fell below 1.4 after the report.

The Canadian retail sales report for August 2025 showed a 1.0% month-over-month increase, reaching CAD 70.4 billion. This marks a solid rebound following July’s decline. Growth was recorded in six of nine sectors, led by motor vehicle and parts dealers, while gasoline stations and fuel retailers reported decreases.

The August report indicates a relatively strong recovery in consumer demand after earlier weakness, suggesting that immediate interest rate cuts by the Bank of Canada (BoC) are unlikely. On the other hand, the preliminary September estimate points to a potential renewed slowdown in sales — if confirmed, it could increase pressure on the BoC to ease monetary policy. Revised September data and upcoming monthly figures will be crucial in assessing the central bank’s stance on rate cuts.

It is also worth noting that inflation in Canada rebounded sharply to 2.4% year over year in September, compared with 1.9% in August. The probability of another BoC rate cut (scheduled on the same day as the Federal Reserve’s decision) currently stands at around 80%. The USDCAD pair remains below the 1.40 level, showing a slight decline after the report. Meanwhile, the strengthening of oil prices suggests that USDCAD could experience a short-term correction toward the 1.3900–1.3950 range.