1. CAD Slides on Economic Weakness
The Canadian dollar weakened further, trading around 1.3730 USD/CAD (≈ 72.83 U.S. cents) a three-week low as fresh data highlighted a slowing economy. April retail sales rose 0.3%, but May estimates show a sharp –1.1% drop, signaling cooling consumer activity and a sluggish labor market.
2. BoC Rate-Cut Expectations
CIBC’s Andrew Grantham noted China’s preliminary retail data “provides another indication that the economy is heading for a stall in Q2,” increasing expectations for two additional 25 bp rate cuts from the Bank of Canada later this year under an easing bias. The BoC held steady at 2.75% on June 4, citing trade uncertainty and elevated core inflation.
3. External Pressures
Global risk-off sentiment driven by escalating geopolitical tensions in the Middle East boosted demand for the U.S. dollar as a safe haven. Meanwhile, Canadian bond yields retreated, with 10‑year yields falling to ~3.315%.
๐ Technical & Short-Term Outlook (USD/CAD)
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USD/CAD has climbed over 0.8% this week, breaking out from holiday-limited activity to trade near 1.3740.
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A short‑term bearish bias persists, with support seen around 1.3715. A bounce above 1.3835 could trigger further upside, while a drop below 1.3685 might open the path to 1.3435.
๐ What to Watch Next
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May retail sales (scheduled for later today): A deeper-than-expected drop could strengthen the case for more BoC cuts.
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U.S. economic indicators: They’ll influence USD strength and CAD performance.
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Trade dynamics: New tariffs, Canada–U.S. trade negotiations, and the outcome of Canada’s retaliatory tariffs on steel/aluminum will shape investor sentiment.
