Buy in USD / CAD as retail sales decline in Canada
USD / CAD turned bullish in early June and although the latest high is lower than the previous one, the lows continue to rise with moving averages serving as support for this pair. We decided to buy this latest pullback just at the moving averages, with the 100 SMA (green) and 200 SMA (purple) just below. Canadian retail sales data was better than expected, but it was still down in July.
Retail sales in Canada in July 2021 and preliminary estimate in August
- Retail sales in July -0.6% vs. -1.2% expected
- Juna’s sales were + 4.2%
- The preliminary estimate for July was -1.7%
- Sales excluding cars and gasoline -1.3%
- Core sales excluding automobiles -1.0% vs. -1.5% expected
- Flash estimate for August + 2.1%
- Decreased sales in 5 of 11 subsectors
- Full report
Food stores (-3.4%) are primarily grocery stores and fell with the opening of restaurants, while resellers of building materials and garden equipment and supplies (-7.3%) fell when lumber prices peaked and people pulled back their renovations. E-commerce sales fell 19.5%.
On the upside, people started shopping for clothing with the reopening, with this category increasing 7.6%. Auto stocks in Canada didn’t quite have the tightening like in the United States (at least they hadn’t done so in July) and sales rose 0.4%, driven by new vehicles.
All in all, this is a decent report, although I could have hoped for more in the preliminary data for August. The Canadian dollar is slightly higher on the report.
Here’s what CIBC had to say about the report:
Canadians appear to have spent a lot more money overall this summer than last year. This reinforces our view that growth in household spending will stimulate the economy in the third quarter. Nonetheless, the savings rate will likely remain high compared to pre-pandemic trends, leaving enough room to stimulate future spending. The concern now is whether the Delta variant will force another round of public health restrictions across the country that will limit the ability of Canadians to go out and shop.
Initial and continuing applications in the United States
- Before the week 332K revised to 335K
- Initial jobs claim 351K vs. 320K four-week moving average estimate
- four-week moving average 335.75K
- pending claims 2.845M vs 2.65M estimate
- the previous week was revised to 2.714M against the previous 2.665M
- four-week moving average 2.804M vs 2.819.75M
- The largest increases in initial claims for the week ending September 11 were recorded in Louisiana (+4,318), District of Columbia (+3,783), Arizona (+3,739), Maryland ( +2018) and in Missouri (+1 658).
- The largest declines were recorded in Illinois (-7,481), California (-5,950), Ohio (-4,665), Texas (-3,635) and Virginia (-2,357).
The report coincides with the BLS Employment Report survey for the upcoming US Employment Report. If so, this report suggests an employment report N / A N / A. However, the Fed’s Powell said he was not looking for reports on stellar jobs but simply for progress reports, suggesting he was going full steam ahead regardless of the ebbs and flows in the reports on the employment in the future.