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Take a look at Canada’s retail sales release tomorrow at 1:30 pm GMT and see if you can sneak in a pip or two (or fifty) from the event!

But first, here are points you need to know:

What happened last time?

  • Headline retail sales rallied from -1.1% to +0.9% in November
  • Core retail sales improved from -0.4% to 0.2% for the month
  • October’s headline retail sales revised higher from -1.2% to -1.1%
  • October’s core retail sales revised higher from -0.5% to -0.4%

Retail trading gained by 0.9% in November and marked the fastest increase since March. Turned out, bigger motor vehicle and parts sales – which were down in October – rallied in November.

Core retail sales also exceeded expectations with a 0.2% uptick after a 0.4% dip in October.

CAD 15-Minute Forex Charts
CAD 15-Minute Forex Charts

The Loonie gained a pip or two during the release but pre-event positioning and the Bank of Canada’s (BOC) dovish statement printed earlier in the week discouraged sustained gains for the Loonie bulls.

What are traders expecting this time?

  • Headline retail sales could slow down from 0.9% to 0.2%
  • Core retail sales to accelerate from 0.2% to 0.3% in December

As you can see, market players expect headline retail sales to slow down in December even as core retail trading is expected to extend its recovery from 0.2% to 0.3%.

A report printed earlier this month showed manufacturing sales dropping by 0.7% in December. That’s the fourth consecutive dip, yo! See, the 11 out of 21 industries that weakened also represents 42.6% of Canada’s manufacturing sector. Yikes!

On the flipside, a net of 35,200 jobs were created in December (vs. 24,900 expected) which helped drag the jobless rate from 5.9% to 5.6%. This is good for Loonie bulls because mo’ jobs mo’ spending, amirite?

How might the Loonie react?

In its latest policy statement the BOC shared that it will closely watch the pace of the recent growth slowdown and pay “particular attention to developments in consumer spending, the housing market, and business investment.

If this week’s retail sales activity slows down much faster than what markets are expecting, then traders might price in a BOC rate cut in the next few months.

Stronger than expected results, on the other hand, could keep Loonie bulls hopeful that the central bank might sit on its hands for a bit longer than what some rate cut junkies are expecting.

Planning on trading the Loonie during the event? You should note that the comdoll has gained the most against JPY, NZD, and AUD in the last 7 days and it has gained the least pips against USD, CHF, and EUR.

If you want to trade where it’s most volatile, then you’ll definitely want to check out USD/CAD’s volatility as well as CAD’s volatility profile against the other major currencies. Here’s an overview for ya: