HomeContributorsFundamental AnalysisUSD Stumbles, CAD Retail Sales Drop

USD Stumbles, CAD Retail Sales Drop

The US dollar retreated Thursday after a week of gains as hawkish talk was brushed aside. The yen was the top performer while the US and Canadian dollars lagged. A new Premium trade will be issued ahead of the Asia Friday trade session. It will be the 3rd index trade.

Goldman Sachs grabbed headlines (but not markets) with a note on Thursday suggesting the FOMC could hike rates five times this year and FOMC speakers underscored the strong economy. But bonds weren’t impressed and 10-year yields retreated back to 2.92%.

The market dabbled with the hawkish talk before having second thoughts. The yen led the way and USD/JPY dropped to 106.68 from 107.78. The move nearly erased two days of gains and underscored the downtrend in the pair and the struggles of the US dollar more broadly.

Struggling right alongside USD was CAD. Another round of NAFTA talks begins Feb 25 and the market is reluctant to buy the loonie until there is some sense of clarity on the trade deal. In addition, the economy continues to send mixed signals.

Canadian December retail sales dropped 0.8% compared to a flat reading expected. Ex autos was even worse at -1.8% compared to the +0.3% consensus. The loonie initially tumbled but got back on its feet.

Odds of a March BoC hike fell to 9% but the April meeting is at 49%. That’s down from 54% before the data but it’s still too high. The BOC wants a resolution on NAFTA and wants to see the effects of prior hikes before making another move. A key loonie factor will be inflation data on Friday. The CPI is forecast to rise just 1.5% y/y, down from 1.9% in December but the trend in core numbers will be key as well.

Before that – at 2350 GMT – Japan will also be looking at CPI numbers. Headline inflation is forecast to rise to 1.3% y/y from 1.0% but core is expected to rise just 0.3% y/y.

Ashraf Laidi
Ashraf Laidihttp://ashraflaidi.com/
Ashraf Laidi is an independent strategist and trader, founder of Intermarket Strategy Ltd and author of "Currency Trading & Intermarket Analysis". He is the former chief global strategist at City Index / FX Solutions, where he focused on foreign exchange and global macro developments pertaining to central bank policies, sovereign debt and intermarket dynamics. Ashraf had also served as Chief Strategist at CMC Markets, where he headed a global team of analysts and led seminars and trainings in four continents. His insights on currencies and commodities won him several #1 rankings with FXWeek and Reuters. Prior to CMC Markets, Laidi monitored the performance of a multi-FX portfolio at the United Nations, assessed sovereign and project investment risk with Hagler Bailly and the World Bank, and analyzed emerging market bonds at Reuters. Laidi also created the first 24-hour currency web site for traders and researchers alike on the eve of the creation of the euro. Laidi's analysis of currency markets stand out based on his distinct style in bridging the fundamental and technical aspects of the markets. Laidi regularly appears on CNBC TV (US, Europe, Arabia and Asia/Pacific), Bloomberg TV (US, Asia/Pacific, France and Spain), BNN, PBSs Nightly Business Report, and BBC. His insights also appear in the Financial Times, the Wall Street Journal and Barrons. He has given numerous interviews and lectures in Arabic, French, and to audiences spanning from Canada, Central America and Asia/Pacific.

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