Still, the Canadian dollar proved resilient on Monday, trading at $1.3714 against its American counterpart. After this currency’s impressive run up of 0.90% on Friday, it still lost some ground today with its -0.13% drop. Earlier in the session, it was as strong as 1.3686, its strongest level since October 2024.
One reason for the recent strength of the Canadian dollar is the outstanding retail sales numbers that came out today for March. Increase in retail sales year-on-year was 5.6%—well above the expected increase of 3.8%. Monthly-wise there too was a broad positive with sales rising 0.5% (and the figure for February was revised up to 0.8%). When accounting for automotive sales, retail was down 0.7%, showing further weakness within the sector.
With US markets closed for Memorial Day, the trading environment was mostly subdued. For one, analysts believe the USD/CAD pair will not move too much. This stability is mostly due to the absence of major economic shocks in the United States and Canada. In the absence of obvious catalysts, traders will turn their attention to technical levels. They have noted support at 1.3673 and 1.3612, with resistance at 1.3771 and 1.3832.
Lingering worries about the unpredictability of President Trump’s trade policy have kept a cloud over the market. This uncertainty poses challenges for policymakers at the Bank of Canada (BoC) as they strive to make accurate forecasts regarding inflation and economic growth. Skyrocketing and ongoing tariffs between the United States and Canada are still at play. Analysts are sounding alarms that this development will dampen consumer confidence and spending.
A rate cut is not too far off as market expectations surrounding future monetary policy have been influenced by the recent data. There is only about a 30% chance the market is pricing in a cut before the next likely key date of Canadian Gross Domestic Product (GDP). Stay tuned to see how this new story unfolds! This particular GDP print will be looked at with extra scrutiny as it has the potential to shape the BoC’s near-term expectations and actions.