Canadian Dollar Hits 29 Year High on Strong Retail Sales

The Canadian dollar hit a new 29 year high today and came within 30 pips of its 30 year high. As we suggested yesterday, the wholesale sales number was a perfect indicator of today?s surprisingly strong retail sales figure.

Spending in the month of March doubled expectations, rising by 1.9 percent, the second biggest gain in 3 years. Demand for autos was particularly strong, but sales of non-auto retailers also hit the highest level on record in the first quarter. The combination of strong inflation and retail sales raises the chance of an interest rate hike by the Bank of Canada later this year. However things should calm down in the week ahead with only leading indicators due for release. There was no Australian or New Zealand data released overnight although Finance Minister Cullen downplayed the chance for future rate hikes. In the week ahead, the only important releases are New Zealand trade balance and Australian leading indicators.