The USD/CAD pair jumped to the 1.3750 range on Friday after the release of weaker-than-expected Canadian Retail Sales numbers, a barometer of the state of the Canadian consumer. This contrasts with the better-than-expected retail sales report from the US Commerce Department on Tuesday, once again stoking fears about the potential of widening interest rate differentials between Canada and the US.
A clear pattern of a sputtering Canadian economy is now emerging, starting with a poor employment report, followed by lower-than-expected inflation numbers, and capped off by the weaker retail numbers on Friday. Investors are now almost unanimously predicting another quarter-point cut by the Bank of Canada at its meeting next week.
While the Federal Reserve appears to be inching closer to its first rate cut in September, the data coming out of the US has been much more robust, putting the possibility of the FED holding firm past September back on the table.
Another factor helping the USD gain value is the clearer picture regarding the outcome of the US election, with most polls now showing a clear lead for Donald Trump. Markets prefer clarity over ambiguity, which has given the US dollar an additional boost.
The Canadian dollar is currently trading at 1.3720 CAD against the US Dollar.
