The Canadian dollar has steadied on Monday after surging 0.90% on Friday. In the European session, is trading at 1.3714, down 0.13% on the day. Earlier the Canadian dollar improved to 1.3686, its strongest level since Oct. 2024. US markets are closed for Memorial Day and there are no US or Canadian events, which likely will mean a quiet day for USD/CAD.
Canada’s Retail Sales Boosted By Auto Sales
Canada’s retail sales impressed in March, rising 5.6% y/y, up from 4.7% in February and beating the forecast of 3.8%. Monthly, rose 0.5%, lower than the 0.8% in February but above the forecast of -0.1%. The strong gain was driven by a sharp rise in the sale of motor vehicle sales and parts. This was likely due to consumers buying cars before US tariffs took effect in April.
Retail sales excluding autos posted a decrease of -0.7%, below the upwardly revised 0.6% gain in February and shy of the forecast of a flat reading. The decline will have the Bank of Canada worried and supports a rate cut at the June 4 meeting. The markets have priced in a rate cut at around 30%, with Canada’s the last key Canadian release before the rate announcement.
The BoC will be keeping a close eye on developments in the US-Canada tariff war. If the tariffs between the two countries remain in effect, consumer confidence and spending will be negatively impacted. President Trump’s trade policy has been unpredictable, making it difficult for BoC policymakers to make inflation and growth forecasts.
USD/CAD Technical
- There is resistance at 1.3771 and 1.3832
- 1.3673 and 1.3612 are support levels
