- Canada releases retail sales
- Fed Chair Powell testifies before a House Committee
- USD/CAD is testing resistance at 1.3253. Above, there is resistance at 1.3329
- 1.3175 and 1.3047 are providing support lines
The Canadian dollar is drifting lower on Wednesday. USD/CAD is trading at 1.3222 in Europe, down 0.10%. The US dollar has endured a rough month of June, and the Canadian dollar has climbed an impressive 2.6% during that time.
Markets eye Canadian retail sales
Canada’s retail sales have hit a bump in the road. In March, retail sales and core retail sales both contracted for a second straight month. Headline retail sales came in at -1.4% and the core rate fell by 0.3%. The markets are expecting better news in the April report, with a consensus of 0.2% for the headline reading and 0.4% for the core rate. With inflation running at 4.4% and the Bank of Canada continuing to raise interest rates, consumers have been hard hit by the cost-of-living crisis and have cut back on spending.
The Bank of Canada needs the economy to cool before it can wrap up the current rate-tightening cycle. The BoC surprised the markets when it raised rates earlier this month, as investors had expected a third-straight pause. The BoC defended its hike by pointing at GDP and inflation, both of which were higher than expected. The labour market remains tight and this has complicated the Bank’s battle with inflation, which could mean a “higher and longer” rate-hike cycle than the BoC had anticipated.
Powell testifies on the Hill
Fed Chair Powell will testify before Congress on Wednesday and Thursday and will face questions about the Fed’s rate path. The Fed paused at this month’s meeting but is expected to raise rates at the July meeting. Powell has said that he can pull off a soft landing that will avoid a recession and large layoffs, but many lawmakers remain concerned that more rate hikes this year will cause significant damage to the US economy.
USD/CAD Technical