Forex Market: USD/CAD retains losses ahead of BoC’s interest rate decision

The loonie, as the Canadian dollar is best known, retained gains against the US dollar despite upbeat US retail sales, as investors remained cautious ahead of Bank of Canadas interest rate decision scheduled to be released on Wednesday.

USD/CAD touched a session low at 1.0942 at 14:11 GMT, after which the pair consolidated at 1.0954, losing 0.24% for the day. Support was likely to be found at April 11th low, 1.0919, while resistance was to be met at April 7th high, 1.1010.

Greenback’s demand was heightened after it became clear that retail sales in the US rose at the fastest pace since September 2012.

Retail sales in the United States increased 1.1% in March on a monthly basis, exceeding analysts’ estimates of a 0.8% gain, data by the US Census Bureau showed today. In February sales rose 0.7%, that was higher than previously reported. The report on retail sales reflects the dollar value of merchandise sold within the retail trade by taking a sampling of companies, operating in the sector of selling physical end products to consumers.

US core retail sales (retail sales ex autos) rose 0.7% in March compared to a month ago, beating analysts’ estimates of a 0.5% advance and following a 0.3% increase in February. This indicator removes large ticket prices and historical seasonality of automobile sales.

“It really is a story of pent-up demand,” said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit, who is the best forecaster of sales in the last two years, according to data compiled by Bloomberg. “As employment levels continue to improve at a modest pace, so too should consumer spending.”, he added, cited by the same media.

Meanwhile, Bank of Canada is scheduled to announce its interest rate decision on April 16th. At their last policy meeting, central banks officials said that they may cut or raise the 1% interest rate, depending how the Canadian economy progresses. The rate has not been changed since the beginning of the third quarter of 2010, the longest pause since 1950s as inflation continues to stay beneath the BoCs 2 percent objective and consumers have amassed record debts as a share of income.

Economists in a Bloomberg poll forecast Governor Stephen Poloz will keep the rate at 1 percent through at least the middle of 2015.

Elsewhere, GBP/USD hit a session low at 1.6697 at 12:35 GMT, after which consolidation followed at 1.6715, losing 0.1% for the day. Support was likely to be received at April 8th low, 1.6607, while resistance was to be met at April 11th high, 1.6788.