Canadian Dollar to US Dollar Exchange Rate Gains, Oil Prices Climb, Retail Sales Disappoint

A number of factors helped the Canadian Dollar advance by over 0.5% against the US Dollar during the local session. The commodity-driven currency had previously softened as a result of comments issued by a Bank of Canada official. The central bank’s deputy governor implied that the BOC might cut borrowing costs further as a result of slack in the labour market and ongoing commodity price pressures, and the ‘Loonie’ accordingly fell below 79 US cents. The BoC shocked markets by unexpectedly slashing borrowing costs in January. Strategist Camilla Sutton said of the movement; ‘We have growth that’s lower than they want, we have employment that’s lower than they want, we have a shock to the economy overall (falling oil prices) and the reaction is quite reactionary. They cut rates once, it looks like they’ll cut rates again unless we see an uptick in oil prices.’

However, as the price of crude oil climbed back above 50 US Dollars a barrel and the US published disappointing economic data, the Canadian Dollar advanced on its US peer. The CAD/USD currency pair moved from a low of 0.7903 to a high of 0.7980 over the course of trading. The US retail sales report had been tipped to show a -0.4% decline on the month in December. Sales actually fell by double that, coming in at -0.8%. This was almost as steep as the -0.9% drop recorded in November. According to Reuters; ‘In January, core retail sales were held back by a 0.7% drop in furniture and home furnishings sales, the biggest decline in this category since December 2013. Receipts at clothing stores fell 0.8%, while sales at sporting goods stores were down 2.6%, their biggest drop in a year. Receipts at online stores rose 0.5%, while sales at electronic and appliance stores gained 0.3%. Declining gasoline prices undercut sales at service stations, where receipts plunged 9.3%, the biggest fall since December 2008.’

The CAD/USD currency pair was little affected by Canada’s New Housing Price Index. The measure came in at 0.1% on the month in December, as forecast, and 1.7% on the year. Further Canadian Dollar to US Dollar exchange rate movement could occur tomorrow following the release of the US University of Michigan Confidence Index and Canada’s Manufacturing Shipments report.