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Looking to grab some quick pips off a news event this week? The upcoming Canadian retail sales release this Wednesday could be a good chance to catch a Loonie setup!

You see, the retail sales report serves as the primary gauge of consumer spending, which in turn accounts for a huge chunk of overall economic activity. In other words, rising retail sales figures are typically indicative of stronger growth.

Apart from that, higher consumer spending also tends to translate to increased business activity when manufacturers ramp up operations to keep up with demand.

What happened last time?

  • February headline retail sales up 0.8% vs. 0.4% forecast
  • February core retail sales up 0.6% vs. 0.2% forecast
  • January headline retail sales downgraded from -0.3% to -0.4%
  • January core retail sales downgraded from +0.1% to -0.6%

The previous release showed strong results, with both the headline and core figures beating expectations in February. Components of the report revealed that higher sales at general merchandise stores and motor vehicle and parts dealers contributed most to the gains.

Part of the gains also came from higher gasoline prices, capping off three consecutive monthly declines. However, sales of appliances and electronics carried on with their slide for the third month in a row. January figures suffered negative revisions as well.

Overlay of CAD Pairs 15-min Forex Charts
Overlay of CAD 15-min Forex Charts

The Loonie tossed this way and that during the actual release but continued to drift sideways against the dollar for the remainder of the session, probably because traders also had their attention on U.S. retail sales data then. The Canadian currency was able to hold on to more of its gains versus the euro, franc, pound, and Aussie.

What’s expected this time?

  • March headline retail sales to increase by 0.8%
  • March core retail sales to rise by 0.8%

For this week’s upcoming retail sales release, both the headline and core readings are expecting to see 0.8% gains, reflecting positive momentum from the previous month.

If the actual results meet or beat expectations, these could point to a somewhat solid rebound for consumer spending this year, likely shoring up growth expectations.

Leading indicators are giving mixed signals, with manufacturing sales in March rising by 2.1% versus the 1.5% consensus and the earlier 0.2% dip, supporting the expected pickup in demand.

However, employment in Canada took a hit during that same month, as hiring fell by 7.2K versus the estimated 3.0K gain. This shaky jobs situation might have dampened spending then.

The March trade report also turned out weaker than expected, printing a deficit of 3.2 billion CAD as exports of energy products surged. Still, imports notably increased by 2.5% mainly on higher purchases of consumer goods, which might be a plus for retail sales.

Keep in mind that the Bank of Canada joined most of its peers in switching to a less upbeat policy stance, so disappointing results could fuel easing expectations.

On the other hand, signs of resilience in the Canadian economy could keep the Loonie among the “lesser evils” especially since it draws support from rising crude oil prices, too.

In any case, be mindful of potential volatility right around the time of the release and make sure you practice proper risk management!