USDCAD – Post CPI & Retail Sales but Ahead of the Main Event


US Retail Sales beat estimates via revision, with February gains of 0.3% overall and 0.2% ex-autos, after net upward revisions. The higher retail sales trajectory, mostly via January boosts, included only modest swings for most components in February, though with a big 5.3% price-led rise for gasoline. The sales roller coaster between October and February reflected an atypical seasonal pattern through the holidays that pushed sales forward and backward out of December, and an Omicron headwind in December and January.

Expectations are now for a smaller Q4 GDP growth boost to 7.3% (was 7.4%) from 7.0%, followed by a revised 1.3% (was 1.6%) GDP growth pace in Q1, with a hit from surprisingly firm export price data. The savings rate likely fell to an 8-year low of 6.2% in February from a prior low of 6.4%. Today’s retail sales data are consistent with a 0.8% business sales gain in next month’s February report.

At the same time, Canada’s CPI rose to a 5.7% (y/y) pace in February from the 5.6% growth rate in January. This is the highest since August 1991 (126 months / 10.5 years). CPI grew 1.0% (m/m) after the 0.9% gain in January. The average of the BoC’s three core CPI measures was 4.2% in February (y/y), up from 3.9% in January. Per Statistics Canada, price increases were broad-based in February. Consumers paid higher prices for gasoline and groceries in February 2022 compared with the same month a year earlier. Shelter costs continued to trend higher, rising at the fastest year-over-year pace since August 1983.Excluding gasoline, the Consumer Price Index (CPI) rose 4.7% year over year in February, surpassing the gain in January (+4.3%) when the index increased at the fastest pace since its introduction in 1999. On a monthly basis, the CPI rose 1.0% in February, the largest increase since February 2013, following a 0.9% increase in January.

The USDCAD dipped to near two-week lows of 1.2686 following the warmer Canada CPI print, finding support at the 50-day moving average at 1.2688. The pairing has since bounced to 1.2705. The 9HR EMA sits at 1.2715 and the 21HR EMA at 1.2740. All eyes on the FED 18:00 GMT and Powell’s press conference 30 minutes later.


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Stuart Cowell

Head Market Analyst

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