CANADA DATA: Expected Retail Sales Recovery Adds To BOC Hold Case
Jul-24 14:22
Canadian retail sales were as weak as expected in May - but the early estimate for June sales showed surprising strength.
- May's data showed sales falling 1.1% M/M, exactly in line with StatCan's advance estimate made a month earlier (-1.0% Bloomberg consensus, 0.4% prior rev from 0.3%), with ex-auto -0.2% (-0.3% expected, -0.3% prior).
- As those aggregates suggest, the overall reading was dragged down by a fall in motor vehicle and parts dealer sales (-3.6%, in a category that makes up around 30% of total retail sales), one of 3 subsectors (of 9 total) to see sales declines including food and beverage (-1.2%) and gas stations (-1.4%). Building material/equipment led gains with a 1.9% rise, with furniture/ electronics/ appliances, health/personal care, clothing, and sporting goods retailers also posting increased sales.
- Core retail sales (ex-autos/auto parts and gas stations) were flat (0.0%). The retail sales drop represented a 1.4% decline in volume terms.
- But perhaps the bigger takeaway is that the advance estimate for June's retail sales is for 1.6% M/M gains - which would be the fastest pace since December.
- This is the final major data input before the BOC's rate decision next week. They may take note of diminishing, or at least steadying, impact of the US-Canada trade war on retail businesses (StatCan: "32% of retail businesses were impacted by the trade tensions in May, compared with 36% in April. The most common impacts in May were price increases, change in demand for product and increased expenses for raw materials, shipping or labour.")
- Indeed the estimated pickup in June would bring retail sales to a new all-time high in nominal terms and at or near all-time highs in volume terms. It would represent quarterly volume growth north of 2.0% (3M/3M SA basis) for the first time since February.
- And on the margins, if confirmed it should give the BOC another reason to remain cautious about easing further given sustained elevation in core inflation and more solid-than-expected jobs growth.
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BOE: Ramsden: Again says he is comfortable saying rates are above neutral
Jun-24 14:18
- "In terms of how the labor market has has dealt with the shocks, how the second round effects have passed through over the last year, it turned out that the inflation process wasn't as self correcting as I thought it a year ago. It might be so policy has had to stay more restrictive than probably I imagined it would be a year ago. That has helped get us to the point where I think, and I think that, you know, the majority on the committee think that the the domestic disinflation process is continuing, but there are those two sided risks around that."
- "I do feel, I still feel comfortable saying that I think the policy is clearly restrictive. Using Philips framing... with interest rates at four and a quarter or 4% still above any sense of what the neutral or terminal rate would be."
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Jun-24 14:17
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FOREX: USDCHF Extends Move Below 0.8100, Eyes Cycle Lows
Jun-24 14:09
- Even amid the spike higher for the dollar on Monday, the Swiss Franc remained relatively resilient through the session, keeping the USDCHF downtrend firmly intact. Despite multiple intra-day tests above the 20-day EMA, the pair continues to respect this average on a closing basis. Furthermore, moving average studies remain in a bear-mode position highlighting a dominant downtrend.
- The resumption of weakness continues to threaten a test of key support at 0.8040, the Apr 21 low. A break of this bear trigger would confirm a resumption of the medium-term technical downtrend and open the 0.8000 handle, and 0.7927, the 1.50 projection of the May 1 - Sep 6 2024 - Jan 13 price swing.
- Last week’s comparatively hawkish SNB may be providing an additional Franc tailwind here, with only a 25% chance of a September rate cut currently priced in. Furthermore, the Citi Broad REER Index remains comfortably off the April highs, potentially providing the committee with fewer short-term concerns regarding excessive Franc strength.
- In order to signal a potential reversal to the USDCHF trend, a clear break of the 50-day EMA would be required, currently intersecting at 0.8285.
