USD/CAD preserves gains despite upbeat Canadian retail sales

US dollar continued trading on positive territory against its Canadian counterpart on Friday, despite the unexpectedly sharp climb of Canadian retail sales in September, as the greenback was still supported by the positive set of data, released on Thursday.

Having climbed to a daily high at 1.0569 at 10:35 GMT, the highest level since July 9th, USD/CAD cross was trading at 1.0534 at 14:01 GMT, gaining 0.14% for the day. Support was likely to be received at current session low, 1.0516, while resistance was to be encountered at July 9th high, 1.0574.

According to data by Statistics Canada, retail sales in the country rose at the fastest pace in four months in September, as sales of new automobiles climbed to their highest level since January 2009. Retail sales increased 1.0% in September on a monthly basis to reach 40.73 billion CAD, which exceeded expectations of analysts at Royal Bank of Canada, pointing a 0.4% gain. Overall retail sales rose 0.1% in August, which has been a revision down from a 0.2% gain previously.

Retail sales, excluding sales in the automobile sector, remained flat in September compared to August at 31.01 billion CAD, while preliminary estimates pointed a 0.3% increase. In August compared to July, the indicator added 0.5%.

At the same time, it became clear that the annualized consumer price inflation in Canada rose at the slowest pace in five months in October mostly due to lower prices of gasoline. The annual consumer price index (CPI) climbed to 0.7% in October, which was below experts projections of an annual rate of 0.9%, while the index reached 1.1% in September.

The core consumer price index, which excludes volatile components such as costs of food and energy products, climbed to 1.2% in October in line with preliminary estimates, after a month ago it stood at 1.3%.

“It could open the door to forward guidance of potential policy statements in the future, if inflation stays this low,” said Greg Anderson, head of global foreign-exchange strategy at Bank of Montreal, by phone from New York, cited by Bloomberg.

Bank of Canada Governor Stephen Poloz said in October that the risk of inflation rate in the country falling below central banks 1%-to-3% range prompted him to indicate on October 23rd that policymakers next move, in terms of monetary policy, would not necessarily be a rate hike.

The above mentioned performance of the annualized overall CPI showed that inflation indeed fell short of banks target range, which added to the case that borrowing costs may be kept on hold. The central bank has maintained its benchmark interest rate at the 1% level since 2010 in order to spur nations economic growth.

Meanwhile, the US dollar received support against peers on Thursday, after the Department of Labor said that the number of people who filed for unemployment assistance in the United States decreased by 21 000 to reach 323 000 during the week ending on November 16th 2013, which appears to be the lowest number since September. Expectations pointed that the number of claims will fall less, to 335 000.

Another positive impulse for the US currency came also yesterday, after Markit Economics reported, that the index, gauging manufacturing activity in the United States, rose to a reading of 54.3 in November, according to preliminary data, marking an eight-month high. The final value of the manufacturing PMI came in at 51.8 in late October. The sub-index of new orders registered a higher rate of increase in November, while the sub-index of employment demonstrated a drop.

Elsewhere, the loonie, as Canadian dollar is also known, was falling against the euro, as EUR/CAD cross advanced 0.53% on a daily basis to trade at 1.4258 at 14:41 GMT. GBP/CAD pair was up 0.20% for the day to trade at 1.7075 at 14:43 GMT.