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CAD: Double header Friday with CPI and retail sales in focus - TDS

FXStreet (Delhi) – Prashant Newnaha, Rates Strategist at TD Securities, suggests that there is a data double-header on Friday for CAD, with the release of retail sales (September) and CPI (October).

Key Quotes

“Of the two, we think the focus should be on the former to drive the initial market reaction. TD’s forecast is for a 0.8% m/m decline in retail sales activity in September, with spending on gasoline and home furnishing leading the way lower. In real terms, TD expects sales to contract, though not as much as the headline number.”

“However, taken in conjunction with a poor manufacturing and wholesale sales suggests that monthly industry level GDP contracted by 0.1%-0.2% m/m in September. This would imply a downward bias to the BoC’s Q3 and Q4 GDP estimate of 2.5% and 1.5%, respectively. On CPI, seasonal factors are expected to be moderately positive for the October CPI report, which includes a lift to shelter due to an annual increase in property taxes and clothing (albeit to a much lesser degree).”

“However, we do see a marginal downside risk to TD’s forecast for core CPI to advance by 0.3% m/m given that the recreational basket typically exerts a drag on the index. On a year-ago basis, TD expects headline and core inflation to decelerate slightly to 1.0% and 2.0%, respectively.”

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