empty
30.04.2025 01:09 PM
Canadian Dollar Preparing for a Breakout

Retail sales in Canada fell by 0.4% month-over-month in February but rebounded in March with a strong increase of 0.7%. On a year-over-year basis, retail sales declined to 4.7% in February, down from a revised 5.3% in January.

Retail sales in Canada fell by 0.4% month-over-month in February but rebounded in March with a strong increase of 0.7%. On a year-over-year basis, retail sales declined to 4.7% in February, down from a revised 5.3% in January. One of the drivers of increased spending was concern over new U.S. tariffs, which prompted consumers to stock up in advance—therefore, spending is likely to show a decline going forward.

This image is no longer relevant

Today, GDP data for Canada covering February and March will be published, though it is unlikely to have a significant market impact. Instead, the market will be watching the release of the initial U.S. GDP estimate with much greater interest, followed by the U.S. jobs report on Friday. Canada's GDP showed steady growth throughout 2024, but the uncertainty that emerged after the onset of trade wars could erase all the gains.

Even a slight slowdown in Canadian GDP growth may turn out to be inconsequential, as the first estimate of U.S. Q1 GDP—due today—could show a much worse result. If pessimistic expectations are confirmed, a spike in volatility is inevitable and will likely lead to another wave of U.S. dollar selling.

Canada has held its federal elections, with Liberal leader Mark Carney winning by a narrow margin, as expected. Carney previously served as Governor of both the Bank of England and the Bank of Canada. He is considered a political heavyweight, and his main task is believed to be helping Canada withstand pressure from U.S. President Donald Trump. "America wants our land, our resources, our water, our country," Carney said in his victory speech. "These are not empty threats. President Trump is trying to break us so that America can own us. That will never, ever happen."

The loonie barely reacted to the election results but is expected to respond to Carney's subsequent actions. Since he won by a narrow margin, he will be forced to form a minority government, which is likely to put some pressure on the CAD. However, a large-scale sell-off of the Canadian dollar seems unlikely at this stage.

The Bank of Canada will hold its next meeting on June 4, which leaves ample time to assess both Carney's initial steps and the overall state of the economy. At its last meeting, the BoC kept the rate unchanged at 2.75%, and if incoming data proves weak, further rate cuts may follow, putting additional pressure on the Canadian dollar.

The net short position on the CAD dropped by a notable $1.15 billion over the reporting week, to –$4.86 billion. The reduction has been particularly pronounced over the past two weeks, and while speculative positioning still favors the U.S. dollar, the fair value has finally diverged from the long-term average with a clear intention to move lower.

This image is no longer relevant

We expect USD/CAD to move lower from current levels toward the 1.3410–1.3430 range. The pair spent the past week in consolidation, but a likely upward correction following a fairly strong decline never occurred, meaning the risk of a corrective bounce remains. The strong resistance zone at 1.4130–1.4160 is unlikely to be reached—resuming the downtrend would require a strong catalyst, which could arrive today following the release of a broad set of U.S. economic statistics.

Kuvat Raharjo,
Analytical expert of InstaTrade
© 2007-2025

Recommended Stories

The Market Will Save Itself

The Fed is no longer the center of the financial universe, and the S&P 500's 13% rally from April lows has once again made U.S. equities expensive. That sums

Marek Petkovich 10:13 2025-05-08 UTC+2

Fed's Rate Hold and US-China Talks Support the Dollar (High Likelihood of EUR/USD and Gold Declines)

The Federal Reserve remained firm, with its leadership reaffirming a steadfast wait-and-see approach. Interestingly, the Fed did not respond to notable changes in the economy, citing heightened uncertainty

Pati Gani 09:53 2025-05-08 UTC+2

The Bank of England Is Ready to Cut Rates

The Bank of England is expected to cut interest rates by a quarter of a percentage point today and signal that another reduction is likely in June. This could potentially

Jakub Novak 09:21 2025-05-08 UTC+2

Why Gold Dropped Sharply After the Fed Meeting

Gold experienced a slight uptick following the Federal Reserve's meeting, where interest rates were kept unchanged and Fed Chair Jerome Powell stated that the central bank is in no rush

Jakub Novak 09:17 2025-05-08 UTC+2

FOMC Meeting Results

The euro and British pound resumed their decline against the US dollar following the release of the Federal Reserve meeting results; however, the drop was not significant, and the future

Jakub Novak 09:15 2025-05-08 UTC+2

What to Pay Attention to on May 8? A Breakdown of Fundamental Events for Beginners

Very few macroeconomic events are scheduled for Thursday, and none are significant. Germany will release its industrial production report for March, and the U.S. will publish weekly jobless claims. These

Paolo Greco 06:05 2025-05-08 UTC+2

GBP/USD Overview – May 8: The Tesla Crisis as the Apex of Trump's Policy

The GBP/USD currency pair traded relatively calmly for most of Wednesday despite the evening FOMC meeting. As per our usual approach, we won't be analyzing the results of that meeting

Paolo Greco 03:39 2025-05-08 UTC+2

EUR/USD Overview – May 8: A First Step Toward De-escalation?

The EUR/USD currency pair continued to trade sideways for most of Wednesday. There was a minor upward movement, but as a reminder, the pair has now been range-bound for three

Paolo Greco 03:39 2025-05-08 UTC+2

EUR/USD: Awaiting the Geneva Meeting

The EUR/USD pair continues to trade within a narrow price range ahead of announcing the Federal Reserve's May meeting results. Although the outcome is largely predetermined (the central bank

Irina Manzenko 00:47 2025-05-08 UTC+2

The Dollar Initiates Talks

Can the Fed Take the Spotlight? Or will the White House's tariff policy continue to overshadow the central bank's actions? The upcoming FOMC meeting and the start of U.S.–China negotiations

Marek Petkovich 00:47 2025-05-08 UTC+2
Can't speak right now?
Ask your question in the chat.
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaTrade anyway.

We are sorry for any inconvenience caused by this message.