In Canada today, CPI and retail sales releases. Retail sales is expected to be soft, with inflation showing mild improvements.
At its recent policy meeting, The Bank of Canada left policy unchanged. However mention that inflation downside risk appears greater than previously expected led to a post-BoC rally in USDCAD.
Expectations going into the print are for only small improvements compared to last. Consensus is looking for 1.0% on headline and 1.3% on core. Citi is at 1.1% on headline and 1.3% on core. One notable fact, headline US and Canadian CPI tend to move with a high correlation with each other. The risk for short CAD positions is if we, and the street, are surprised on the upside – given the holidays and low liquidity over the next few weeks – this could lead to a bout of short CAD covering.
We will also see Canadian retail sales for October at 8:30. Expectations are for 0.2% on headline and flat on exauto. Last month, headline surprised to the upside...