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Looking to grab some quick pips off a news event this week? The upcoming Canadian retail sales release this Friday 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?

  • Headline retail sales dipped 0.1% vs. projected 0.4% gain
  • Core retail sales fell 0.2% vs. expected flat reading
  • July headline retail sales upgraded from 0.4% to 0.6% increase
  • July core retail sales revised up from 0.1% fall to 0.0% figure

The previous release showed downbeat results as both headline and core consumer spending stumbled in August. Components of the report revealed that the drop was mostly due to lower sales at food and beverage stores, which marked their first decline in three months.

In addition, gasoline stations also reported a notable drop in sales because of lower fuel prices, even though volumes were actually up by 2.8% during the month.

On a positive note, sales at general merchandise stores and motor vehicles and parts dealers saw gains in August.

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

Surprisingly enough, the Loonie popped higher during the actual release, even though the numbers turned out weaker than expected. This was likely a “buy the rumor, sell the news” type of reaction as market watchers may have actually been anticipating the figures to come in way worse.

Others say that it was probably the positive revisions in the earlier release and the fact that most sales volumes picked up that hinted at some form of bottoming out for the consumer sector.

What’s expected this time?

  • September headline retail sales to dip by 0.1%
  • September core retail sales to show 0.1% uptick

For this week’s upcoming retail sales release, the headline reading is expected to show another 0.1% drop while the core version of the report might print a 0.1% uptick.

However, weaker than expected results could continue to fuel BOC interest rate cut expectations, which could drag the Loonie south.

Manufacturing sales turned out better than expected in August, posting a meager 0.2% dip compared to the estimated 0.5% fall. On the flip side, it’s also worth noting that employment in the same month took a huge hit as the report indicated a 1.8K drop versus the projected 14.7K gain and earlier 53.7K increase.

If the actual figures fall way off the mark, these could be enough to stoke BOC rate cut expectations next month. Stronger than expected results, on the other hand, could keep Loonie bulls hopeful that the central bank might sit on its hands for the rest of the year.

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