Canadain Dollar Selloff Pauses After CPI and Retail Sales Data

The Canadian dollar fell to a 4 month low on Friday ahead of the nation's CPI and Retail Sales reports. Earlier in the week the Canadian currency had been under pressure against its US counterpart as positive economic data and speculation over tighter monetary policy underpinned the greenback. Additionally, recent dovish comments from BOC Governor Poloz and RBA Governor Stevens weighed on the Canadian dollar.

Tame Inflation 

Consumer price inflation in Canada fell 0.2% in October, missing expectations for a 0.2% increase.

Meanwhile, core consumer price inflation, which excludes food and energy, rose 0.2% last month, higher than the reading of 0.0% expected.

Canada's annual inflation rate fell to a five-month low of 0.7 percent from 1.1 percent in September. With inflation below the central bank target of between 1 percent and 3 percent, the Bank of Canada is under little pressure to raise interest rates.

Positive Retail Sales

Statistics Canada reported that retail sales beat expectations, rising by 1.0 percent in September on strong new car sales.

Core retail sales, which exclude autos, were flat in September, missing expectations of a 0.4% rise.

RBA Governor Stevens Comments

The Canadian dollar softened along with fellow 'commodity currencies', the Australian dollar and New Zealand dollar, after Reserve Bank of Australia Governor Glenn Stevens said he was "open minded" on the possibility of intervention.

Speaking to the Australian Business Economists annual dinner in Sydney on Thursday, Reserve Bank of Australia Governor Glenn Stevens said, "Our position has long been, and remains that foreign exchange intervention can, judiciously used in the right circumstances, be effective and useful."

BOC Poloz Comments

On Wednesday Bank of Canada Governor Stephen Poloz stated that the current level of monetary stimulus is still appropriate.

Speaking to Senate banking committee in Ottawa, Poloz said “The Bank judged on October 23 that the substantial monetary policy stimulus in place remained appropriate and decided to maintain the target for the overnight rate at 1 percent.”

The Bank of Canada has maintained its benchmark interest rate at 1 percent since 2010 as part of an effort to stimulate the economy.

USD/CAD Daily Chart

Looking at the daily USD/CAD chart we can see that price reached up to major resistance at 1.0566 before retreating. Potential support lies below at 1.0443.