Canada's Retail Sales and Fed Chair Powell's Testimony Grab Market Attention
![Canada's Retail Sales and Fed Chair Powell's Testimony Grab Market Attention](https://admin.es-fxmag-com.usermd.net/api/image?url=media/pics/canada-s-retail-sales-and-fed-chair-powell-s-testimony-grab-market-attention.jpeg&w=1200)
The Canadian dollar is drifting lower on Wednesday. USD/CAD is trading at 1.3222 in Europe, down 0.10%. The US dollar has endured a rough month of June, and the Canadian dollar has climbed an impressive 2.6% during that time.
Canada’s retail sales have hit a bump in the road. In March, retail sales and core retail sales both contracted for a second straight month. Headline retail sales came in at -1.4% and the core rate fell by 0.3%. The markets are expecting better news in the April report, with a consensus of 0.2% for the headline reading and 0.4% for the core rate. With inflation running at 4.4% and the Bank of Canada continuing to raise interest rates, consumers have been hard hit by the cost-of-living crisis and have cut back on spending.
The Bank of Canada needs the economy to cool before it can wrap up the current rate-tightening cycle. The BoC surprised the markets when it raised rates earlier this month, as investors had expected a third-straight pause. The BoC defended its hike by pointing at GDP and inflation, both of which were higher than expected. The labour market remains tight and this has complicated the Bank’s battle with inflation, which could mean a “higher and longer” rate-hike cycle than the BoC had anticipated.