This week’s Canadian core retail sales came in at 1.7% vs 0.8% expected. This offers some more support for the Canadian economywhich means we could start to see some more upbeat tones coming from Governor Poloz next week. The BOC is expected to leave rates unchanged on May 29 and it has set a tone of ‘on pause’ until the global growth slowdown has recovered. He identified the escalation of the US-China trade war as the ‘primary risk’. On May 16 Poloz said that ‘the latest numbers have been excellent and (barring trade war risks) there is a real chance that growth is better than the BOC forecasts’.
Poloz can blow hot and cold a little with his guidance and these latest retail sales figures will now flow through to a better GDP figure along with the record jobs gains in April. Canadian April ADP employment came in at +61.7K vs 13.2K prior, and the prior was revised up +77k. Two strong readings, see Graph below that Adam posted for a visual on the strength of the recent figures:
I was a surprised at the last BOC meeting that Poloz was as dovish as he was, as I felt the domestic data and oil market had been pretty supportive for the CAD. Obviously, a slowing global growth scenario is unsettling and I expect that Poloz didn’t want to get ahead of himself. So, with the US-China trade war still very much on, he may downplay the growth again. However, he has recognised that growth could be better than ‘forecast’, and 29 May may be the time to acknowledge that. If he does we can look for some instant CAD strength.