The Canadian dollar showed little movement on Friday. In the European session, USD/CAD is trading at 1.3845 at the time of writing, down 0.07%
It has been a relatively quiet week for the Canadian dollar, and even a significant 50 basis point cut in interest rates by the Bank of Canada failed to shake the Canadian currency. The massive cut has been priced by the markets.
as inflation has fallen below the Bank of Canada’s target of 2% and the economy remains weak despite gradual rate cuts by the central bank. This week’s cut was the fourth in the same number of meetings and the Bank of Canada hopes a deep rate cut will boost economic activity.
Bank of Canada Governor Teff says monetary policy has worked
Teff said after the interest rate meeting that “monetary policy worked” and that both headline inflation and core inflation had fallen. Does patting on the back of Tiff mean the Bank of Canada will return to modest cuts of 25 basis points? Not necessarily — Tiff said a price move would “contribute to a rebound in demand,” and if the economy remains stagnant and consumer spending does not improve.
the Bank of Canada could repeat a 50 basis point move in December.
The U.S. will release durable goods orders and consumer sentiment at the University of Michigan later today. The manufacturing sector contracted for four consecutive months, and analysts predict a 1% decline in basic durable goods orders for September after no change in August. Analysts project the University of Michigan’s consumer sentiment index to drop to 68.9 in October, down from 70.1 in September. High inflation continues to frustrate consumers, and uncertainty surrounds the upcoming U.S. election.
which is fiercely contested with just 10 days to go.
Bank of Canada cuts interest rates by 50 points to support economy
After three 25 basis point cuts, the Bank of Canada decided to accelerate the easing cycle and introduce a 50 basis point cut. With inflation exceeding the 2% to 1.6% target, the bank is now clearly focused on supporting the economy.
Another cut is likely to take place in December.
although it is not clear whether it will be 25 basis points or 50 basis points.
Stock markets fell on Wednesday as tensions over the U.S. election finally emerged. Betting markets show clear lead for Trump.
but polls remain mixed and voting could be limited to a handful of swing states. There is also some fear about how to receive the result. Recounts and civil unrest such as the 2020 election may be repeated.
The strength of the US dollar continued and the EURUSD pair fell below 1.08 to 1.076 in Wednesday’s session. The USDJPY pair made the biggest move and is now about 10% above September’s low. Some commentators have begun to speculate on whether the Bank of Japan will step in and try to support the yen again.
Elsewhere, the Bank of Canada has stepped up its easing cycle and cut interest rates by 50 basis points.
in line with market expectations. Interest rates are now at 3.75% after peaking at 5.0% last year. Obviously, they are in a hurry to reach a neutral price and support the economy before it turns into a recession.
The consensus was that the Bank of Canada would cut interest rates by 50 basis points.
but there were some doubts as the bank had already cut interest rates in June, July and September. The bank has now cut interest rates by 75 basis points more than the Fed and 100 basis points more than the Bank of England.
Canadian retail sales rise in August, led by the automotive sector
Retail sales rose 0.4% to $66.6 billion in August. Sales rose in four of the nine sub-sectors, led by increases in sales of auto and parts dealers.
Core retail sales which excludes petrol stations, fuel vendors and auto and parts dealers – fell 0.4% in August. In terms of volume, retail sales rose 0.7% in August.
Sales at car and parts dealers rose by 3.5% in August, marking the largest increase in retail sales. Increased sales at new car dealers (+4.3%) led the increase, followed by sales of used car dealers (+2.1%). Lower sales at other car dealers (-0.3%) were offset by gains at auto parts, accessories and tyres (+0.4%).
Sales at petrol stations and fuel vendors fell (-2.7%) in August. In terms of volume, sales at petrol stations and fuel vendors fell by 2.1%.
Decline in core retail sales
After two consecutive monthly increases, core retail sales fell 0.4% in August due to lower sales at food and beverage retailers (-1.5%). Sales at food and beverage retailers declined in all four store types.
led by supermarkets and other grocery retailers (excluding essential retailers) (-1.9%).
Sales at retailers of furniture, home furnishings, electronics and appliances (-1.4%) were also reported in August..
The largest increase in core retail sales in August came from retailers of sporting goods, hobbies, musical instruments, books and miscellaneous (+0.9%).
Retail sales rose in seven counties in August. The largest regional increase was observed in Ontario (+0.9%), led by higher sales at auto and parts dealers. In Toronto’s Urban Census Area (CMA), sales rose 0.6%.
m e-commerce retail sales in Canada
On a seasonally adjusted basis, e-commerce retail sales fell 2.5% to $3.9 billion in August.
accounting for 5.9% of total retail, compared to 6.1% in July.
