Canadian Dollar Struggles for Direction Despite Higher Retail Sales, Housing Prices

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The Canadian dollar is struggling for direction against many of its currency peers to finish the trading week, despite positive economic data. The loonie also failed to take advantage of higher energy prices, potentially affected by a slightly rising US dollar and a coronavirus pandemic that could hinder the Canadian economic recovery over the coming months.

According to Statistics Canada, retail sales increased by 1.1% in September, up from the 0.5% gain in August. The market had penciled in a boost of 0.2%. This also represented the fifth straight monthly expansion in the retail trade, led by a rebound in receipts at general merchandise and food and beverage stores. Retail sales are up at an annualized rate of 4.6% and climbed 22.6% in the third quarter.

Early forecasts the statistics agency suggest retail sales will be relatively unchanged in October.

In October, the new housing price index jumped 0.8%, falling short of the median estimate of 1%. Year-over-year, the new housing price index has surged by 3.9% last month.

In other data, private-sector payrolls fell 79,500 last month, up from the 564,400 decline in September.

Earlier this week, the consumer price index (CPI) rose 0.4% in October, up from the 0.1% drop in September. This was also higher than the market forecast of 0.2%. The core inflation rate, which excludes the volatile food and energy, jumped at a higher-than-expected rate of 1%.

Rallying energy prices failed to lift the loonie on Friday. December West Texas Intermediate (WTI) crude oil futures tacked on $0.43, or 1.03%, to $42.17 per barrel. January natural gas futures advanced $0.054, or 1.99%, to $2.774 per million British thermal units. US crude prices enjoyed a 5% weekly gain, while natural gas prices slumped 9% this week.

JPY COVID-19Since Canada maintains a current account deficit, exports are critical to the national economy. Oil and gas remain the country’s top exports, so any change in prices – high or low – can affect the Canadian dollar and the broader economy.

Canada is entrenched in the second wave of COVID-19, with daily infections rising as high as 6,000. The nation’s largest city, Toronto, was placed under strict lockdown on Friday. In total, Canada has reported 319,000 confirmed cases, with a death toll of more than 11,000.

The USD/CAD currency pair rose 0.15% to 1.3094, from an opening of 1.3072, at 20:23 GMT on Friday. The EUR/CAD was unchanged at 1.5525.

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