The greenback remained range bound against the loonie last Friday, despite upbeat Canadian retail sales data for January. Three weeks ago, the Bank of Canada clearly stated that it doesn’t foresee any possibility of rate hikes for the rest of this year. This dovish statement keeps the Canadian dollar slightly weaker than the US dollar. Overall, the USD/CAD pair traded in a narrow range of 1.3720 and 1.3786 in the final trading session of last week.
According to Statistics Canada, the country’s retail sales rose by 1.40% m-o-m in January to C$66.40 billion, following an increase of 0.50% in the previous month, and more than twice the 0.70% growth forecast by economists.
Sales increased in seven out of nine subsectors, accounting for 88.70% of retail trade.
While motor vehicle and parts dealers grew for the sixth consecutive month at 3% m-o-m in January, gasoline stations and fuel vendors recorded an increase of 2.90%.
Excluding gasoline stations and fuel vendors and motor vehicle and parts dealers, Canada’s core retail sales inched up 0.50% m-o-m in January. The increase was led by food and beverage retailers. Specifically, beer, wine, and liquor retailers recorded a rise of 2.30%. Convenience retailers and vending machine operators posted a growth of 6%. Also, specialty food retailers reported a growth of 3.30%.
In volume terms, retail sales rose by 1.50% m-o-m in January.
Clothing, clothing accessories, shoes, jewelry, luggage, and leather goods retailers grew by 1.80%. In particular, clothing and clothing accessory retailers posted a rise of 2.20%. Sporting goods, hobby, musical instrument, book, and miscellaneous retailers recorded a decline of 1.20%.
Retail e-commerce sales inched down 0.10 m-o-m to C$3.30 billion in January, representing 5% of aggregate retail trade, compared with 5.1% in December.
As per an advance estimate provided by Statistics Canada, the country’s retail sales fell by 0.60% m-o-m in February.
The US Census Bureau stated that durable goods orders fell by 1% m-o-m in February, following a 5% decline in the previous month and missing forecasts of 0.60% growth.
Transportation equipment recorded a decline of 2.80% in February. Specifically, nondefense aircraft and parts posted a decline of 6.60%. Like defense aircraft and parts, they recorded a drop of 11.10%. Motor vehicles and parts posted a decrease of 0.90%.
Excluding transportation, core durable goods orders were virtually unaltered in February. Economists had anticipated a growth rate of 0.20%. Capital goods orders declined by 2.20%, while nondefense orders fell by 1.20%. Machinery orders decreased 0.50%. Computers and electronic goods inched down by 0.10% but grew by 0.40% for fabricated metal products. Primary metals rose by 0.30%. Orders for nondefense capital goods, devoid of aircraft, posted a growth of 0.20% in February.
The S&P Global US flash manufacturing PMI (purchasing managers’ index) index improved to a five-month high of 49.30 in March from 47.30 in February, which pleased the market, which was expecting a decline in the manufacturing PMI to 47. A reading below 50 indicates contraction and vice versa.
Also, the US flash manufacturing output index rose to a ten-month high of 51 in March from 47.40 in February.
Likewise, the S&P Global US Flash Services PMI rose to an 11-month high of 53.80 in March from 50.60 in February and surpassed forecasts of 50.30. The reported figure reflects the robust growth of the service sector.
Overall, the US flash PMI composite output index hit a 10-month high of 53.30 in March, up from 50.10 in February.
Notably, goods producers posted the first increase in production since October 2022. However, fresh export orders declined for the 10th successive month, and overseas demand remained gloomy.
A robust overall demand scenario paved the way for quicker employment growth in March. The pace of aggregate job creation was the quickest in six months. During the same period, backlogs of work rose for the first time since September 2022.
Furthermore, fresh orders at service providers inched up for the first time since September 2022, as higher customer activity triggered a small rebound in new sales.
Despite the positive scenario, business confidence fell to a three-month low in March.
The weak US economic data is expected to keep the USD/CAD pair range-bound in the short term.
Technically, the USD/CAD pair is ascending after testing the support at 1.3650. The next major resistance is anticipated only near 1.3850. Additionally, the currency pair is trading above its 50-day moving average, while the MACD indicator is showing a positive reading. Therefore, we anticipate the USD/CAD pair to remain in an uptrend in the days ahead.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
