TORONTO, June 20 (Reuters) – The Canadian dollar fell slightly against the U.S. dollar on Friday, following retail sales data that pointed to a slowing economy. Retail sales rose by 0.3% in April, but a preliminary estimate suggests a potential drop of 1.1% in May.
“Canadian consumers kept spending in April, but the decline in the May advance estimate for retail sales indicates the economy may be heading for a slowdown in Q2,” Andrew Grantham, a senior economist at CIBC Capital Markets, noted. He added that consumer caution amid tariff uncertainty and a weakening labor market is expected to continue, with two more interest rate cuts of 25 basis points anticipated from the Bank of Canada in the second half of the year.
The loonie was down 0.2% at 1.3730 per U.S. dollar, or 72.83 U.S. cents, after trading between 1.3688 and 1.3739. It hit a near three-week low of 1.3746 on Thursday and was set for a weekly decline of 1.1%. While some positives for the currency, like a potential economic deal between Canada and the U.S., have been overshadowed by safe-haven demand for the U.S. dollar.
Canadian bond yields fell across the curve, with the 10-year yield down 2 basis points at 3.315%.
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Canadian dollar extends weekly decline as evidence mounts of economy slowing
TORONTO, June 20 (Reuters) – The Canadian dollar edged lower against its U.S. counterpart on Friday as domestic retail sales data added to recent evidence of an economic slowdown. n nRetail sales were up 0.3% in April on a monthly basis as the momentum seen in the previous months when customers brought forward purchases to beat the impact of tariffs continued, but a preliminary estimate showed that the number is likely to contract by 1.1% in May. n nSign up here. n n”Canadian consumers continued to spend in April, but a decline in the May advance estimate for retail sales provides another indication that the economy is heading for a stall in Q2,” Andrew Grantham, a senior economist at CIBC Capital Markets, said in a note. n n”That renewed consumer caution amid tariff uncertainty and a weakening labour market is likely to persist for a little while yet, and we continue to expect two more 25 bp (basis point) interest rate cuts by the Bank of Canada in the second half of the year to help support a recovery.” n nThe loonie was trading 0.2% lower at 1.3730 per U.S. dollar, or 72.83 U.S. cents, after trading in a range of 1.3688 to 1.3739. On Thursday, the currency touched a near three-week low at 1.3746, and was on track for a weekly decline of 1.1%. n nSome positives for the currency, such as the prospect of a speedy economic deal between Canada and the United States, have been offset by recent safe-haven demand for the U.S. dollar. n n”Heightened geo-political tensions may persist for now, with the potential of US involvement in the Israel/Iran confrontation dangling over markets for the next couple of weeks,” Shaun Osborne and Eric Theoret, strategists at Scotiabank, said in a note. n nU.S. crude futures were trading 0.2% lower at $74.95 a barrel after the White House delayed a decision on U.S. involvement in the Middle East conflict, but remained on course for a third consecutive weekly rise. Oil is one of Canada ‘s major exports. n nCanadian bond yields eased across the curve, with the 10-year down 2 basis points at 3.315%. n nReporting by Fergal Smith in Toronto; Editing by Nia Williams