Weak CPI and Retail Sales Data Have Sent the CAD Lower

Market Reviews

Euro remains relatively steady versus US dollar after showing considerable losses. Canadian dollar dips on weak economic data. Japanese yen and Swiss franc are the weakest ones. New Zealand dollar and Australian dollar are the strongest ones.

Meanwhile, the British pound rose after EU negotiator Michel Barnier said that the Brexit deal with the UK was 90% complete, but obstacles remain. Today’s data also showed, that the UK budget deficit reached its lowest level in 11 years. The deficit stood at 4.123 billion pounds in September, compared with 4.958 billion pounds a year ago. This was the lowest September deficit since 2007.

European shares are trading mixed. FTSE gained 0.37%, DAX lost 0.16% and CAC dropped by 0.66%. German 10 year yield fell 0.005 to 0.416. Italian 10 year yield rose 0.059 to 3.737. That is, German-Italian yield spread is now above 330.

Italian political problems remain in the focus. On Thursday, the European Commission sent Rome a letter, calling the draft budget an "unprecedented" violation of EU tax rules. The EU started the first formal step to reject the budget which will lead to direct clash between Rome and Brussels. Italy will now have until October 22 to respond to the letter.

Economic data from Canada showed, that headline retail sales dropped by 0.1% mom in August versus expectation of 0.4% growth. Ex-auto sales fell by 0.4% mom versus expectation of -0.2% mom. Headline CPI dropped by 0.4% mom in September versus expectation of -0.1% mom. Annually, CPI slowed to 2.2% yoy, down from 2.8% yoy and missed expectation of 2.9% yoy. CPI core common slowed to 1.9% yoy, down from 2.0% yoy. CPI core median slowed to 2.0% yoy, down from 2.1% yoy. CPI core trim slowed to 2.1% yoy, down from 2.2% yoy.

Today’s data also showed, that the Eurozone current account surplus rose to EUR 24 billion in August from EUR 19 billion in July. A year ago, the surplus was EUR 39 billion. The visible trade surplus increased to EUR 22 billion from EUR 19 billion in the previous month, while the surplus in services trade decreased to EUR 9 billion from EUR 10 billion.