Canada: Retail sales forecasted to give back 0.4% in June – TDS

Canada’s retail sales are forecast to give back 0.4% in June following a number of upbeat retail reports, according to analysts at TDS.

Key Quotes

“Gasoline station sales should serve as the primary catalyst for the pullback after another sizeable decline in the price at the pump, while motor vehicle sales could see an incremental gain from record levels. This should leave ex-auto sales weaker at -0.6% m/m, though much of that is driven by the aforementioned drop in gasoline sales.”

“Broader measures of retail sales (ex autos, gas) should see little change. One downside risk is household furnishings, which are likely to decline from May on the slowdown in the GTA housing market. However, we do not think this will have a wider spillover to total retail sales given its isolated geographical impact and the fact that measures of consumer sentiment have remained upbeat. Because seasonally adjusted consumer prices were unchanged in June, real retail sales should come in near the nominal print.”

“Foreign Exchange

CAD is likely to remain sensitive to top tier data releases, especially misses. This reflects the recent downshift in Canadian data surprise momentum and the fact that the daily CAD nominal effective exchange rate is running about 3% above its 1yma. Also keep in mind, TD’s forecast miss translates into a 2-sigma surprise against consensus. Historically, this has seen USDCAD rise about 0.4% following the release. Our dashboard shows that USDCAD is also a bit cheap to high-frequency fair value and market positioning in CAD remains overextended. This leaves USDCAD vulnerable to some consolidation on a weaker report, which also points to a move back above 1.26, with strong resistance near 1.264.”