Canadian dollar update – Friday August 21, 2020. Canadian retail sales expected to rise a healthy 24.5%.
FX & market recap:
USD was softer in overnight markets, though moves have been small and there has been limited new news. US equity futures are slightly higher (+0.3%) and USD/JPY is slipping back toward the bottom of the week’s range (105.60). Biden formally accepted the Democratic nomination last night.
Day ahead: There are no key releases in the US today, but plenty of important data elsewhere. Flash PMIs in the Eurozone and UK were as expected and continue improving. In the UK, we also had July retail sales and public finances. Canada’s retail sales are for June and have already been released in provisional form (CAD).
Canadian dollar highlights:
Most economists see little reason to deviate from StatsCan’s 24.5% m/m ‘flash’ estimate for June retail sales. Importantly, the gain would take retail goods spending into positive territory YoY at 2%, though the services side has been expectedly lagging in the recovery. Auto sales (40% below February levels in May) should be a key driver of June’s sequential gain. Looking ahead to July, most expect a gain of 5% or a bit higher. USD/CAD features support at 1.3133 and resistance at 1.3232.
This morning’s flash PMIs were be closely watched. At these levels, EUR is very sensitive to downside surprises in data. In July, the PMIs beat consensus expectations for a third consecutive month, with the composite rising to the highest level in more than 20 years. A slowing in the pace of recovery is apparent in the high‐frequency data from Germany, which shows retail footfall and truck toll mileage stagnant vs. the prior month. Therefore, the pace of the recovery should begin to slow from here.
British pound highlights:
Consumer confidence was unchanged at ‐27 in August. The rebound in consumer confidence from the May lows has been moderate compared to business confidence. Today brought flash estimates of the August PMIs and headline indices were expected and built on the sharp rebound seen in July, with further small gains, reflecting the relatively late reopening of large parts of the economy in UK.
Asia Pacific highlights:
USD/JPY dropped from 105.80 to 105.45 in Asia and Europe, then climbed to 105.68 in NY. A fall in US Treasury yields weighed on prices, and bearish USD/JPY technicals are capping topside moves.
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