Retail sales support CAD short-term

Canada in recovery mode! The recession seen in the first half is likely to be over. Finally strong domestic demand and demand from the important neighbour the US seems to be over compensating for the dampening effect of the weak oil price. The result: further rate cuts are not on the agenda at present. 

After all the two rate cuts implemented so far this year were mainly an "insurance policy" against the economic consequences of a falling oil price. Strong retail sales are likely to confirm this view today, but are only likely to support CAD against USD temporarily. 

"For the time being USD is likely to benefit as a result of the imminent Fed rate reversal; whereas the Bank of Canada will gratefully accept further CAD weakness. That indicates, medium term USD-CAD is not likely to have topped at 1.3350. However, EUR-CAD is likely to move mainly south", argues Commerzbank.