Unlike what we might think, the energy-related Canadian dollar boost from continued crude oil prices rise is lively. Indeed, though the performance in USD/CAD remains rather subdued started in April 2018 due to a strong USD rally since mid-March 2018, things look a bit different when looking at CAD performance against other major currencies. The strength in loonie is particularly interesting when looking at the development in CHF/CAD, CAD/JPY and EUR/CAD for which the CAD gained ground by +5.12%, +5.08% and +4.78% respectively. Accordingly, the impression of a non-commodity impact is misleading. On the contrary, the CAD robust performance against the greenback should be praised.
Key data releases in Canada will concern April consumer price index and retail sales. Inflation readings are expected to remain stable at +0.30% m/m and +2.30% y/y along with a slight increase of +0.50% in core retail sales (prior: 0%).
Looking forward, we would favor a USD/CAD pullback in the short-term, strongly influenced by positive Canadian data releases and weakening USD momentum. Currently given at 1.2809, USD/CAD is trading sideways, expected to head along 1.2850 in the short-term.
By Vincent Mivelaz