The Canadian economy is not doing too bad: retail sales rose 0.4% in December, much better than expected. Core sales jumped 0.7%. And while consumer prices fell 0.7%, worse than expected, y/y it is at 1.5%, as expected. More importantly, core inflation dropped only 0.3% and y/y it is a stable and solid 2.2%. Canada has relatively high inflation and is currently bucking the global trends.
USD/CAD falls to 1.2420. Update: the slide continues and Dollar/CAD is down to 1.2410.
There has always been a struggle between the strength of the Canadian economy (enjoying US strength among other factors) and the heavy weight of oil prices.
Canada was expected to report a fall of 0.5% in the Consumer Price Index (CPI) for December m/m. Year over year, a rise of 1.5% was expected, much lower than 2% seen beforehand. Core CPI was expected to slide 0.3% but actually rise 2.2% y/y, stronger than 2.1% seen in November. Retail sales carried expectations for a gain of 0.1% and core sales for 0.5%.
USD/CAD was trading high in the sky, just under 1.2450 towards the releases.
The Canadian dollar suffered a surprising rate cut from the BOC. The Bank of Canada changed its interest rate for the first time since 2010 as a reaction to falling oil prices which hurt Canadian exports and also push inflation lower.
USD/CAD was also on the rise as an after-effect to the massive QE program announced by the European Central Bank. The announcement triggered a strengthening of the US dollar which hit the loonie as well.
More: USD/CAD: Running Away; Buy Dips targeting 1.30 – CBA
Here is how it looks on the chart:
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