The Canadian Dollar (CAD) continued to strengthen against the US Dollar (USD) on Friday, recording its fifth consecutive day of gains. As a result, the USD/CAD pair fell by nearly 1.30% this week, dropping below the 1.3800 mark and reaching a two-week low. This movement was in response to the mixed Retail Sales data from Canada.
Earlier in the day, the Loonie pair was already under pressure due to a general decline in the US Dollar, ahead of the release of the Canadian Retail Sales data. After the figures were published by Statistics Canada, it was revealed that Retail Sales had risen by 0.8% in March, surpassing market expectations of 0.7% and showing a significant improvement from February’s -0.5% decrease. However, Retail Sales excluding Auto sales were lower than expected, coming in at -0.7% in March compared to the previous month’s 0.6% growth.
Although these Retail Sales figures suggest that consumer spending may be declining when auto sales are excluded, overall consumer resilience remains intact. In response to the data, Andrew Grantham, senior economist at CIBC Capital Markets, stated, “Canadian consumers have not significantly reduced their spending amidst tariff uncertainties.”
The Canadian Dollar (CAD) also received a boost from the weakening USD, as the US Dollar Index (DXY) – which measures its value against a basket of six major currencies – fell to a two-week low and traded around 99.40 at the start of American trading hours. This decline in the US Dollar is reflective of overall market caution due to escalating US fiscal challenges and global tariff uncertainties. US President Donald Trump’s recent proposal of a 50% tariff on imports from the European Union starting June 1, citing stalled negotiations, has added to market concerns. Additionally, Trump has threatened to impose a 25% tariff on Apple products in an effort to bring back manufacturing to the US.