In forex, the markets are watching a fixed game with the USD/Chines yuan (USD/CNY), leaving plenty o...
USD/CAD Traders Ready for Canadian Retail Sales Report
11/23/2010 12:01 am EST
Annualized consumer prices in Canada are expected to rise 2.2% percent in October from 1.9% percent the month prior, according to the average number of economists surveyed by Bloomberg News. The projected increase in consumer prices is attributed to higher energy and food prices on the back of the Harmonized Sales Tax (HST).
Interest rate expectations in Canada have been gathering momentum, and a reading exceeding forecasts will likely increase these estimates as a rising CPI may prompt the central bank to raise its key overnight lending rate in order to manage economic growth and inflation, which will lead the loonie (Canadian dollar) to push higher. According to the Credit Suisse overnight index swaps, traders are pricing in a 12% chance that the Bank of Canada will raise borrowing costs at its next meeting on December 7.
Meanwhile, retail sales in Canada will be released today at 13:30 GMT. Sales are estimated to rise 0.7% in September after climbing 0.5% in August amid strong existing home and auto sales. Higher retail sales are an indication of increased consumer confidence. All in all, better-than-expected reports may turn out to be the catalyst needed for the Canadian dollar, and will validate the short USD/CAD technical outlook.
After testing the upper bounds of the descending channel, the pair looks poised to retest 1.0118. Meanwhile, the speculative sentiment index at 2.72 signals additional losses.
By Joel Kruger of DailyFX.com
DailyFX provides forex news on the economic reports and political events that influence the currency market.
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