The inflation rate in Canada has decreased more than expected.

The Canadian dollar has been consistently strong, hitting a one month high due to the weakening of the US dollar. Conversely, Canada's inflation rate dropped to 3.1% year-over-year in October from 3.8% the previous month. This significant decline had positive implications for the Canadian dollar. Moreover, the Bank of Canada (BoC) predicted an inflation rate of around 3.5% until mid-next year. The unexpected decrease in inflation rates led investors to believe that the BoC might not increase interest rates further this year.

Retail sales in Canada increased by 0.6% in October, indicating rapid growth in consumer spending. The majority of the sales were in gasoline and fuel, which increased by 3.2%, amidst rapidly rising gasoline prices due to adjustments in crude oil standards. General merchandise and hardware stores followed suit.

However, despite the increase in retail sales, industrial sales in Canada showed a downward trend of 2.7%, along with a 1.1% decrease in wholesale sales. These declines were primarily attributed to reduced sales in machinery and equipment, indicating that overall business growth remains somewhat subdued.

Canada's government budget deficit increased to $3.88 billion in September from $2.16 billion in the same month of the previous year. This rise was due to increased government spending in various areas, marking an 18.2% increase to $7.33 billion in transfers to other government levels and a rapid 65.2% increase to $4.16 billion in public debt charges. This upward trend reflects higher interest rates. Meanwhile, there was an increase in government revenue, particularly from increased taxes.

The significant increase in exports and stabilized imports forecasts a return to a balanced trade account for Canada, estimated at around $1 billion in the third quarter. This is expected to be announced this Wednesday. Additionally, the decreasing deficit in the service account indicates that the figures for the trade account this time around won't be far off from expectations.

Techical analysis data (5H)

Resistance: 1.3616, 1.3635, 1.3656

Support: 1.3576, 1.3555, 1.3536

Source: Investing.com