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.”
