The loonie has remained flat for a third straight day. Investors are flying right now ahead of the retail sales data. Canadian consumers remain incredibly resilient in their spending. So far, they continue undeterred, despite an increasingly uncertain economic climate and the impacts of US tariffs. At the start of the European session, the USD/CAD currency pair is 1.3698. That’s a decrease of 0.02% on the day.
Since April 1, the Canadian dollar has risen by 4.8% against its US counterpart. This progression upward takes place even in the face of continued economic uncertainty. The market’s attention now turns to the next wave of economic indicators, with retail sales numbers due from Canada taking center stage.
Consumer Spending Trends
Despite the uncertainty hanging over global and Canadian economies, Canadian consumers have displayed impressive resilience in their spending. Consensus is for retail sales in April to be up 0.5% from March. This follows a 0.8% jump the month before. Finally, motor vehicle sales have never been better! Unsurprisingly, consumers are scrambling to get their purchases in before the US tariffs go into effect this April.
The upside surprise in retail sales is a further reminder, though, of one part of the economy that the global headwinds have failed to rattle. As consumers continue to face these challenges, how and if they are willing to spend what they have could be key to determining the future economic landscape.
Currency Market Dynamics
Within the world of currency trading, the loonie—in reference to the Canadian dollar—has surprisingly held up in favor against its US counterpart. For the USD/CAD pair, immediate resistance is seen at 1.3720 and 1.3730, with immediate support coming in at 1.3709 under pressure. If the currency pair fell through this floor, additional support can be found at 1.3699.
The Bank of Canada’s current cash rate is 2.75%. This discount rate would still be markedly below the Federal Reserve’s current target range of 4.25% to 4.50%. Analysts warned that any future rate cuts by the Bank of Canada would further weaken the Canadian dollar. Most importantly, they expect this change to dramatically increase its overall value. Traders of all stripes are hanging on these developments, as they likely represent the key to future risk-on/risk-off trading.
Upcoming Economic Indicators
And next week, Canada will release key CPI and GDP data. These numbers would impact the currency market tremendously while increasing or suppressing consumer confidence. When combined with strong first quarter GDP growth of 2.2%, this paints a picture of a healthy economic environment for that quarter. The next inflation report, scheduled for release on August 10, will be especially pivotal. It can provide a sneak peek into trends in consumer spending and the state of the economy.
While investors continue to await these crucial indicators, they are understandably cautious yet hopeful about the Canadian economy’s prevailing resilience. Most importantly, consumers’ ability to continue spending in the face of growing external pressures is paramount. The most important effects will be on retail sales and the strength of the Canadian dollar.