Canada: Setting Up for Retail Sales (March) and CPI (April) – TDS

Canada: Setting Up for Retail Sales (March) and CPI (April) – TDS

20 May 2016, 07:34
Roberto Jacobs
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Canada: Setting Up for Retail Sales (March) and CPI (April) – TDS

Research Team at TDS, suggests that Canada’s retail sales will complete the full swath of activity data for Q1 following the release of manufacturing and wholesale sales earlier this week.

Key Quotes

“With Q1 GDP tracking at 2.7% following the wholesale sales report, a retail print that’s moderately close to consensus will help to affirm the Bank of Canada’s 2.8% target from the April MPR. CPI data for April will be released simultaneously but will take a backseat to retail sales.

Retail Sales: Industry reports of stronger auto sales and rising prices at the pump will team up to lift retail sales by a forecasted 0.4% m/m. Stripping out the influence of the former, ex-auto sales are forecast to show a respectable 0.3% monthly advance which reflects a firm month for existing home sales and an expectation of continued spending across general merchandise categories. This outcome would also be consistent with rising measures of consumer confidence.

CPI: Rising gasoline prices are expected to push the nonseasonally adjusted all-items price index higher by 0.2% m/m in April. This monthly advance will cause the year-ago metric to accelerate to 1.6% due in part to more favourable base-year effects. Core prices are not expected to show as much momentum, as the robust increases observed over the last three months face a renewed headwind from seasonal factors. So while the seasonally-adjusted series is forecasted to increase by 0.2% m/m, unadjusted prices should remain unchanged in the month. This inertia will cause core inflation to slip just a touch to 2.0% from the 2.1% pace set in March.

CAD: We maintain our view that external drivers will continue to dominate USD/CAD for now. This reflects the recent repricing of the Fed risks this summer along with over-extended market positioning in CAD. Indeed, a shift in the marginal probability of a Fed hike this summer should tilt the balance of short-term drivers towards a move higher in USD/CAD. This reflects the feedback loop of lower US real rates, rising oil prices, and positive risk appetite, which leaves CAD and other risksensitive currencies ripe for a correction. We also note that CAD positioning indicators suggest cyclical long in CAD, increasing its vulnerability to any macro shocks. That said, with TD looking for a sizeable upside surprise in retail sales we could see USD/CAD lose steam ahead of 1.32 on an upbeat number. Still, we prefer to buy the dips with 1.2960 an attractive level to scale back into long USD/CAD positions.”


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