The Canadian dollar is weakening against several major currency pairs on Tuesday as investors comb through the latest retail sales report. The loonieâs slide also comes after Prime Minister Justin Trudeau secured a minority government following the recent federal election. With the electoral contest out of the way, traders will keep a focus on a central bank that refused to budge on interest rates before the election.
On Monday, the Liberal Party won a minority government with 157 seats, losing 29 seats from the previous federal election in 2015. The Conservatives came in second with 121, followed by the Bloc Quebecois with 32, and the New Democratic Party with 24.
As a result of a somewhat fragile government, Trudeau and the Liberals will need to extend their hands across the aisle and search for more than a dozen votes to pass legislation. Should the prime minister present bills that are progressive in nature, then the grits could have a friend in the NDP.
Trudeau promised to work on behalf of all Canadians, not just those who supported him in this election. Andrew Scheer, leader of the Opposition tories, stated in his concession speech that the Conservatives are the âgovernment in waiting.â NDP leader Jagmeet Singh said that the real winners and leaders in the race were Canadians.
In the months leading up to the election, the Bank of Canada (BOC) suggested that it would not act on monetary policy until after the electoral contest. With the 40-plus-day race finished, investors will now wonder if the BOC will follow other central banks and ease monetary policy by cutting interest rates. The BOC will hold a policy meeting on October 30 and markets are betting that it will leave rates unchanged at 1.75%.
According to Statistics Canada, retail sales slipped 0.1% in August to a year-over-year 1.1%, falling short of the market forecast of a 0.4% gain. Many areas of the marketplace experienced lower receipts, including restaurants (-0.8%), supermarkets (-0.8%), gasoline stations (-0.4%), and building material and garden equipment (-0.5%). The big component coming out of the report was the second consecutive double-digit jump in cannabis store sales, surging 18.6%.
Moreover, retail sales ex autos dropped 0.2% in August, following a flat reading in July.
The USD/CAD currency pair rose 0.09% to 1.3102, from an opening of 1.3089, at 14:42 GMT on Tuesday. The EUR/CAD advanced 0.09% to 1.4593, from an opening of 1.4581.
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