After a couple of very volatile days, the Canadian dollar has gained back some strength and looks like it will close out the week on a high, with the push coming from oil moving back into the mid $45’s.
Economic releases today out of Canada included CPI and Retail Sales. Both Core Retail Sales and Retail Sales came in much lower than expected, by over a full percent. Core CPI came in as expected at 0.6, while CPI exceeded the expected 0.7% and came in at 0.9%. Headline inflation is expected to remain stable at 1.0% y/y, with core seen softening from 2.2% to 2.1% y/y. BoC policy expectations are leaning toward further easing, as the markets are pricing in an 85% chance of a 25bpt rate cut over the next 12 months.
Overall a mixed bag for economic data out of Canada, leaning slightly to the negative side, with no US data releases today.
EUR is rising as market participants assess the outlook following this week’s sizeable Fed-driven volatility. Near term, the risk for EUR remains vulnerable to further weakness as we consider Fed-ECB divergence with the ECB implementing a QE program set to continue through September 2016. Near term risk remains centered on Greece. Its 10Y yield testing 12% on concerns about renewed deposit flight, escalating dependence on Emergency Liquidity Assistance, and confrontation with the ECB over monetary financing of short term debt.