The Loonie got a one-way ticket to the bottom of the charts last week. Will this week’s reports do the comdoll any good?
CPI report (March 23, 12:30 pm GMT)
Last month’s upside inflation surprise enabled the Loonie to regain a chunk of intraweek losses.
Apparently, prices were up in all major components, with transportation and shelter leading the price increases. Bank of Canada’s (BOC) annual core inflation figure remained at 1.2%, though, and prevented the bulls from getting too cray.
This week analysts are expecting the headline CPI to clock in a monthly rate of 0.4%, lower than last month’s 0.7% reading.
With the BOC looking comfortable with its current rates, it would take a lot to spur them into action. Pay attention to the BOC’s own set of “core” inflation – the trim, median, and common CPIs – to see if there are any inflation trends we should know about.
Retail sales report (March 23, 12:30 pm GMT)
After a strong November, retail purchases had gone down in December. Specifically, headline retail sales had fallen by 0.8% while the core figure sank by 1.8%.
Since November’s numbers were revised higher, the Loonie was able to recover from its post-release selloff.
This week analysts are expecting to see a 1.1% growth for headline retail sales, while core sales are expected to show a 0.9% uptick.
Last Week’s Price Review
The Loonie is easily THE worst-performing currency of the week (as of 5:00 pm GMT). And looking at the overlay of Loonie pairs and oil below, we can see that the Loonie took directional cues but didn’t really track oil prices that closely.
And if we remove oil from the overlay, we can see that the Loonie was actually trading sideways for the most part and even began to show diverging price action near the end.
However, there were two very noticeable instances when the Loonie was rushed by sellers across the broad.
The first instance happened on Tuesday, apparently as a reaction to BOC Guv’nah Poloz’s speech. Forex Gump has the details in his 2 Takeaways from BOC Poloz’s Speech.
The short of it, though, is that the BOC still has a hiking bias, but Poloz gave a bunch of reasons why the BOC isn’t likely to hike again anytime soon, which very likely made rate hike junkies cry and dump the Loonie.
Moving on, the second instance when the rug was pulled under the Loonie’s feet (figuratively speaking) happened on Thursday. And as noted in Thursday’s U.S. session recap, this was likely in response to news that Canadian existing homes sales plunged by 6.5% in February, dragging the overall reading to its lowest level in five years.