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Loonie Halts Rally as Canadian Retail Sales Unexpectedly Retreated in April

Loonie Halts Rally as Canadian Retail Sales Unexpectedly Retreated in April

Trang Nguyen,

THE TAKEAWAY:Canada Retail Sales Fell 0.5 Percent toC$39.85 in April > Negative Signal for Economic Growth in the Middle of the Year > CAD Halts Rally versus Most of its Major Peers

Canadian retail sales unexpectedly pulled back in April, triggered by lower sales at motor vehicles dealers,clothing and sporting goods stores, and building material and garden equipment dealers.

Sales in retail stores fell 0.5 percent to C$39.85 in April, Ottawa-based Statistics Canada reported today. The figure missed economist’s expectation of 0.2 percent gain, according to Bloomberg News survey. The less volatile figure, excluding auto sector, edged down 0.3 percent in the month compared to 0.3 percent increase widely anticipated. Meanwhile, March’s reading was upwardly revised to a surge of 0.3 percent from a gain of 0.1 percent initially reported.

Canadian consumers reversed their spending on eight of eleven subsectors that account for seventy-eight percent of April’s total retail sales. In volume terms, retail sales declines for the third straight month in April, falling 0.8 percent. Sales at motor vehicle and parts dealers unexpectedly slipped 1.2 percent due to lower receipts at both new car dealers (-1.4%) and used car dealers (-2.5%). Similarly, sales at clothing and clothing accessories store sales plunged 2.8 percent after having advanced 1.3 percent in the previous month. Also, sales at building material and garden equipment dealers, food and beverage stores and sporting goods stores all declined. In contrast, gasoline stations posted 1.1 percent gain, offsetting a March decline.

Regarding to region, retail sales fell in four most populous provinces that represents 85 percent of total retail sales. Ontario (-1.1%), Quebec (-0.5%), Alberta (-0.2%), British Columbia (-.2%) all reported decline. On the contrary, sales grew in Saskatchewan (+0.7%) andManitoba (+0.3%).

USDCAD 1-minute Chart: June 21, 2012

062112_Canada_Retail_Sales_April_body_Picture_2.png, Loonie Halts Rally as Canadian Retail Sales Unexpectedly Retreated in April

Chart created using Strategy Trader – Prepared by Trang Nguyen

The Canadian dollar extends losses versus U.S. dollar, New Zealand dollar and pound and pares gains against other peers in the minutes following the dismal report. As can be seen from the 1-minute USDCAD chart above, the loonie immediately weakens 20 pips against the greenback from 1.0193 to 1.0213. The Relative Strength Indicator crossing above the 70-level, an overbought territory, signaled that currency traders were aggressively purchasing the reserve currency while cutting their loonie holdings. At the time this report was written, the loonie depreciated 0.3 percent to $C1.0216 per U.S. dollar

--- Written by Trang Nguyen, DailyFX Research Team for DailyFX.com

To contact Trang, email tnguyen@dailyfx.com

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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