Trading Guide: Canadian Retail Sales (Apr)

If you’re looking for forex trade opportunities ahead of the Brexit vote, then this trading guide is for you! Let’s take a look at how you can make pips from Canada’s retail sales release.

Why Should You Trade This Report?

Every month Statistics Canada prints a report that gauges the total value of sales at the retail level. If you’ve been a good student of the School of Pipsology, then you’ll now that retail sales is a useful estimate of consumer spending trends.

A strong reading points to higher consumer demand, which could result to rising inflation in the long run. And with the Bank of Canada (BOC) targeting higher inflation levels, a strong retail sales reading could mean less dovishness from the central bank.

Aside from the headline numbers, Canada also prints the “core retail sales” figures, which excludes the automobile sales for the month. Auto sales are usually volatile, so many analysts like to look at core retail sales trends rather than the headline numbers.

What happened last month?

Retail sales showed a 1.0% decline in March, which is weaker than February’s 0.6% uptick and the 0.6% increase that market players had been expecting. Even the core figure came in at -0.3% after rising by 0.3% in the previous month.

A closer look tells us that it was fewer sales of automobiles and their parts that did the report in. In volume terms, the decline was led by sales at motor vehicles and parts dealers (-2.9%), furniture and home furnishings (-3.7%), and lower oil prices (-1.1%).

Not surprisingly, the Loonie fell across the board with USD/CAD, EUR/CAD, and GBP/CAD making new intraday highs while CAD/JPY made new session lows. Yipes!

What are market players expecting this time?

Tomorrow at 1:30 PM GMT we’ll see Canada’s retail sales figures for April. This is the first report for Q2 2016, so a significantly weaker or stronger release could set the tone for consumer spending for the quarter.

The headline figure is expected to show a 0.8% growth for the month while removing auto sales is expected to yield a growth rate of 0.6%.

How might the Loonie react?

If the previous months’ price action were any indication, we’ll likely see a direct reaction from the Canadian dollar. That is, a worse-than-expected reading would drag it lower while upside surprises (especially from the core reading) could boost it higher.

Canadian Dollar 15-Minute Forex Charts

Canadian Dollar 15-Minute Forex Charts

Keep in mind a few points though! First, the Loonie’s reaction to the report tends to wane in a couple of hours. Next and more importantly, Canada’s retail sales release is scheduled only a few sessions away from the start of the highly-anticipated BREXIT vote.

Aside from several forex brokers already changing their margin requirements ahead of the event, other factors such as risk sentiment and oil price movements could also affect your Loonie trades. This means that day or news trade strategies might be best when pricing in the results. What do you think?


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