The USD/CAD pair finds interim support near 1.3430 after Statistics Canada reported mixed Retail Sales report for July. Consumer spending expanded at a slower pace of 0.3% vs. expectations of 0.4%. In June, Retail Sales expanded nominally by 0.1%. Retail Sales excluding automobiles expanded strongly by a full one percent, doubling expectations of 0.5%. The economic data was contracted by 0.7% in June. Scrutiny of the Retail Sales report shows that demand for automobiles remained weak. Households postponed demand for automobiles to avoid higher interest obligations.
The Canadian Dollar remains strong as the oil price is preparing for a fresh upside above the immediate resistance of $91.00. More upside in the oil price is anticipated due to deepening supply concerns and expectations of an end to the global rate-hike cycle. It is worth noting that Canada is the leading exporter of oil to the United States and higher oil prices support the Canadian Dollar. This week, Canada’s inflation data for August remained mixed. Headline Consumer Price Index (CPI) expanded at a higher pace of 0.4% vs. expectations of 0.2% due to rising energy prices. The Bank of Canada (BoC) takes core inflation into account for the monetary policy framework, therefore, the impact of the recovery in gasoline prices would be limited. Meanwhile, the US Dollar struggles to find a direction as investors remain mixed about whether the Federal Reserve (Fed) will keep interest rates unchanged in the remainder year or will hike one more time. As per the CME Fedwatch tool, traders see a 71% chance for interest rates remaining steady at 5.25%-5.50% in the November monetary policy meeting.
