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Retail sales lift Canadian dollar

H.S. Borji
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Retail sales lift Canadian dollar

The Canadian dollar climbed against its US counterpart Wednesday, as auto sales spurred another strong month of retail sales in Canada.

The loonie, as Canada’s currency is called, advanced 0.13 percent to 0.9325 US, easing from an intraday low of 0.9334 US.

The USDCAD pair declined 0.12 percent to 1.0726. The pair traded within a daily range of 1.0710-1.0747. The pair is testing the initial support at 1.0724. Below this level, the next support is likely found at 1.0709. On the upside, the pair is likely to face resistance at 1.0757.

In economic data, Canadian retail sales advanced 0.7 percent in May, following a gain of 1.3 percent that was bigger than initially reported, Statistics Canada reported today in Ottawa. A consensus of market analysts forecast retail sales to rise 0.6 percent.

Retail sales reached CAD $42 billion in May, a new record high.

In volume terms, retail sales were up 0.4 percent.

Year-on-year, retail sales climbed 4 percent.

Excluding automobiles, retail revenues increased just 0.1 percent, following a gain of 0.8 percent in April. Economists forecast sales in this category to rise 0.3 percent.

Sales increased in seven of the 11 retail sub-sectors, which account for 56 percent of total retail trade. Motor vehicle and parts dealers led the advance, increasing 2.5 percent in May. Meanwhile, gasoline stations increased revenues for the seventh consecutive month, as sales at these stores increased 2 percent.

May marked the fifth consecutive month retail sales increased, as consumer spending continued to drive economic growth in the second quarter. Today’s figures suggest the Canadian economy was rebounding at a steady rate in the second quarter after a broad weather-induced slowdown in the first three months of the year resulted in disappointing GDP growth.

Canada’s economy expanded at an annual rate of 1.2 percent in the first quarter, compared to 2.9 percent in the fourth quarter of 2013 that was the biggest annualized gain in more than two years.

Combined with home sales, consumer spending has been one of the main catalysts of economic growth in Canada over the past five years. Outside the consumer segment, Canada’s recovery has lacked consistency, as business investment and exports have struggled to take off, while job growth remains subdued.

The Canadian dollar has suffered through this consistency, as speculators continue to bet against the currency amid dovish remarks from the Bank of Canada and a strengthening US economy. The latter is expected to usher in higher US interest rates, which could weigh heavily on the loonie.

In other trading, the loonie was little changed against the Japanese yen, as the CADJPY traded steadily at 94.44. The pair faces initial support at 94.39, the 50-day exponential moving average, and resistance and 94.59.

The EURCAD held steady at 1.4456 and was little changed from its previous close. The pair is supported at 1.4429. Initial resistance is likely found at 1.4513.

The loonie strengthened against the British pound, as the GBPCAD declined 0.16 percent to 1.8293. The pair faces initial support at 1.8293 and resistance at 1.8358.

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