Canadian Dollar Gains as Investors Anticipate Retail Sales Data

The Canadian dollar witnessed a modest rise in value against the US dollar on Thursday, with the currency pair USD/CAD dropping by 0.19% to trade at 1.3324 during the European session. This movement comes just ahead of key economic data releases from Canada, which are projected to show signs of improvement, potentially influencing the strength of the Canadian dollar further.

Anticipated Economic Data to Drive the Canadian Dollar

Investor focus is currently set on Canada's upcoming retail sales report due for release today, followed by the Gross Domestic Product (GDP) figures set to come out on Friday. There is optimism that these indicators will show an upturn, providing positive momentum for the Canadian currency.

Meanwhile, the United States is expected to release its third estimate of the third-quarter GDP, where analysts forecast it to echo the prior estimate of a 5.2% increase. For Canada, a rise in retail sales is anticipated, following a 0.6% growth in September, the sharpest in five months. The market consensus for October is further growth at a 0.8% month-over-month rate.

Economy and Sector Insights

While Canada's overall economic strength hasn't been robust, earlier concerns of a potential shallow recession have been allayed as recent data indicated minor growth for the third quarter. GDP for September inched up by 0.1% month-over-month, and the forecasts for October suggest a slight improvement to 0.2%.

The manufacturing sector has been struggling, seen through weak domestic activity and a lowered global demand for Canadian products. Data showed Manufacturing Sales fell by 2.8% month-over-month in October. Further insights will be available with the release of November's data on Friday.

Inflation in Canada has been hovering around 3%, remaining persistently above the Bank of Canada's 2% target. The central bank has paused interest rate hikes for three consecutive instances and does not see the current economic situation as warranting further increases, despite earlier cautioning about rising rates.

Technical Look at USD/CAD

The USD/CAD exchange rate is currently testing a support level at 1.3350, with another layer of support lying at 1.3281. On the upper side, the pair faces resistance at 1.3450 and, subsequently, at 1.3550.

Canadian, Retail, GDP