The Canadian dollar is strengthening against a basket of currencies at the end of the trading week, despite disappointing retail sales data. The loonieâs performance also comes as the central bank warned that the path of interest rates remains âuncertain,â leaving markets guessing when the next rate hike will take place in 2019 â if at all.
According to Statistics Canada, December retail sales fell 0.1% to $50.4 billion, beating median estimates of a 0.3% decline. The drop was driven by a 3.6% slide at gasoline stations and a 4% decrease in appliance and electronics stores. There was a 1% surge in sales at automobile and parts dealers.
Bank of Canada (BOC) Governor Stephen Poloz reiterated previous remarks that rate moves will depend on economic data. That said, Poloz, speaking in a prepared speech in Montreal on Thursday, suggested that the benchmark rate target of between 2.5 and 3.5% is âhighly uncertain.â For now, Poloz believes the below-inflation level of 1.75% is enough to stimulate the economy.
Poloz did note that the BOC will pay attention to data and determine their effects on the economy, particularly mortgage markets, real estate, and indebted consumers.
Given these uncertainties, we have kept interest rates unchanged at 1.75 per cent since last October. We will remain decidedly data-dependent as the domestic and international situations evolve.
Meanwhile, a new survey of executives found that many do not feel the new Canadian, US, and Mexico trade agreement is superior to the previous North American Free Trade Agreement (NAFTA). In fact, according to the FP500/Forum Research Business Barometer study, half of the executive participants said the old pact was better for the Canadian economy than the USMCA.
Lorne Bozinoff, president of Forum Research, told The Financial Post:
The perception is that there were a lot of concessions made to the U.S. on dairy, on drug patents and things like that. People are sensitive to those concessions and I donât know that there was enough promotion of the dealâs benefits. So we gave up this, but what did we get? And I donât think itâs enough to say it could have been a lot worse.
The USD/CAD currency pair fell 0.33% to 1.3190, from an opening of 1.3232, at 15:48 GMT on Friday. The EUR/CAD tumbled 0.27% to 1.4959, from an opening of 1.4999.
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