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Looks like the Loonie managed to recoup some of its losses in the second half of the week. Can the bulls maintain their momentum?

Here are potential catalysts that can affect price action this week:

CPI reports (Aug 21, 1:30 pm GMT)

Consumer prices had risen by 2.0% from a year earlier in June, which was slower than the 2.4% increase seen in May.

Removing volatile items like energy, however, showed prices increasing by 2.6% after rising by 2.7% in the previous month.

On a monthly basis, prices had fallen by 0.2% after a 0.4% gain in May. Last but not the least, Bank of Canada’s closely watched core inflation slipped from 2.1% to 2.0% in June.

Lower inflation usually supports rate cut moves. Luckily for Loonie bulls, the bad juju of the inflation release was offset by a much better-than-expected manufacturing sales report printed during the same trading session.

This week, market geeks see Canada’s prices rising by another 1.7%, while the monthly reading is expected to recover by 0.1%.

Remember that an inversion of Canada’s yield curve from last week just upped the pressure on the Bank of Canada (BOC) to follow its peers and cut its interest rates.

If this week’s consumer prices point to further weaknesses, then we could see Loonie players start to price in a rate cut. But if this week’s release gives the BOC a bit more breathing room, then we could see the Loonie pop up across the board.

Retail sales (Aug 23, 1:30 pm GMT)

Retail activity unexpectedly fell in May, with headline retail sales clocking in its first decline in four months (-0.1%). The core figure wasn’t much better with another 0.1% slip after May’s 0.3% decrease.

Turned out, sales dropped at food and beverage stores as well as beer, wine, and liquor stores. Clothing and clothing accessories also took hits together with general merch stores.

The surprise contraction dragged the Loonie lower though it eventually recovered before the end of the trading session.

Will the bears attack again this week? One look at the forex calendar tells us that analysts expect headline retail sales to fall by another 0.3% while the core figure is seen at -0.2%. Yipes!

Watch details closely to see if the weaker spending trends are only caused by lower energy prices or if Canadian shoppers just aren’t feeling like spending these days.