April retail sales disappointed, declining 1.2 percent on the month following three consecutive monthly increases. The decrease was primarily due to lower sales at motor vehicle and parts dealers. Inclement weather in many parts of Canada also may have contributed to the overall decline in April. Along with the slow growth CPI numbers, and previous weaker economic data, the Bank of Canada will likely keep interest rates unchanged until there is some significant change in direction.
Oil prices are up, OPEC and Russia agreed today on a production increase of 1milliom barrels a day, but in reality, it’s 700,000 barrels as some OPEC countries are unable to meet their increased levels. The agreement took place after Saudi Arabia was able to reach a last-minute deal to overcome Iran’s opposition. Since the increases are less than expected, oil is now trading at $68 USD a barrel up 3.8%, however its impact on the USDCAD has been taking it from its weakest point of the day 1.3382 to back to being unchanged.
USDCAD 1.3300, 1.3280, 1.3210 1.3335, 1.3365, 1.3382
USD-CAD has come off the boil after a one-wee run higher stalled at 1.3336 yesterday, which is a one-year high. Choppy oil prices into the OPEC meeting today have cast some impact on the Loonie. Last week’s unexpectedly hawkish Fed guidance, a likely easing in oil supply quotas by OPEC and Russia, and ratcheting trade tensions have been a supportive mix of USD-CAD, which we expect to remain the case. Support is at 1.3227-30. Canada released CPI and retail sales data today. We expect CPI to climb to a 2.5% y/y pace in May from 2.2% in April — a jump that would not alter the BoC’s gradualism approach to tightening. We anticipate retail sales rising only 0.1% m/m in April after the 0.6% gain in March.
EUR-USD rallied over 0.5%, and was up, as of the late AM session in Europe, by 1.4% from the 11-month low that was posted yesterday at 1.1508. The pair has logged a high of 1.1673 so far, which is the loftiest level the euro has traded at since June 14. Above-forecast composite Eurozone PMI survey readings, in preliminary June data, has given the common currency buoyancy, coming with the dollar already established on a softening track. EUR-USD would need to close today above 1.1608, last week’s closing level, to make this only the second up week the pair has seen since mid April. We advise caution in following the euro higher as Italian politics has the potential to rock the euro boat, and seemingly on an ongoing basis. In the mix are the rising trade tensions, which are mostly impacting German auto makers. Mercedes-Benz maker Daimler warned yesterday that global trade tensions were already showing their sales.