THE TAKEAWAY: [Canada retail sales unexpectedly rose 0.7 percent] > [Stronger spending in automobiles] > [CAD strengthened,USD/CAD declined]

Retail sales in Canada increased faster than expected in October for the fourth time, with a jump in new car sales. Ottawa-based Statistics Canada reported today that retail sales climbed 0.7 percent in October from a month ago, following a revised gain of 0.2 percent from a 0.1 percent increase initially reported. October’s figure beats the consensus forecast of economists surveyed by Bloomberg News, which had called for a 0.2 percent growth.

Automobile and parts sales rose the most among all subsectors, up 1.6 percent to C$8.96 billion, while gasoline station receipts gained 1.6 percent to C$5.10 billion. Sales excluding autos grew 0.5 percent in October which also exceeded economist forecast for a 0.2 percent gain.

Coupled with above-forecast increases in employment and wholesales earlier this month, the boost in retail sales adds to signs that Canada’s economy may be recovering after a weak third quarter.

USD/CAD 1-minute Chart: December 20, 2012

Forex_Canada_Retail_Sales_Rose_More_Than_Expected_in_October_CAD_Strengthened__body_1220.png, Forex: Canada Retail Sales Rose More Than Expected in October; CAD Strengthened

The Canadian dollar surged against the U.S. dollar following the release of the stronger-than-expected retail sales figures. As can be seen from the one-minute chart above, the USD/CAD pair fell to C$0.9882 from C$0.9887. At the time this report was written, the loonie remained higher against the greenback, with the USD/CAD pair trading at C$0.9875.

--- Written by Renee Mu, DailyFX Research