Canada's retail sales and CPI are out today

The economists are a tick above consensus for headline CPI (cons 1.0%). Core CPI is supported by seasonal increases in motor vehicles and clothing, outweighing a seasonal drop in travel services (-5%m/m). Core CPI should remain at 2.1%y/y (cons 2.0%). 

"We see the decline in gas prices more than offset by a 0.3%m/m gain in core CPI", says RBC Capital Markets.

The outcome should not move the needle for the BoC, which has consistently seen underlying inflation at 1.5- 1.7% of late, looking through temporary impacts from lower oil prices (headline lower) and CAD depreciation (headline/core higher). Meanwhile, economists look for retail sales to beat expectations on the core measure (cons -0.4%) even if the headline disappoints. 

Core sales should be supported by solid employment growth in 2015 so far and possibly a delayed impact from retroactive child care benefit payments in late July. The 0.3% m/m gain expected on a volumes basis would be consistent with 2.5% q/q saar GDP growth in Q3. WTI is hovering just above USD 40/bl again, and with USD underperforming overnight, CAD was dragged down in sympathy. 

"AUD/CAD has broken above the 200dma for the first time since August but we still like it a lot lower on a 3- to 6-month horizon (holding a 0.90/0.85 put spread expiring in March 2016)", added RBC Capital Markets.