CAD strengthens as BoC rate cut odds drop on robust retail sales

USD/CAD declined 0.4% to 1.3620 as Canadian dollar gained strength following better-than-expected retail sales data, significantly reducing Bank of Canada rate cut expectations. Canadian retail sales rose 0.9% in March, beating forecasts of 0.1%, while core retail sales jumped 2.1% versus 0.2% expected. The strong consumer spending data has prompted markets to reprice BoC rate cut probabilities, with June cut odds falling from 65% to 40%. CIBC economists noted the data challenges their dovish stance, suggesting potential policy reassessment. Technical analysis shows USD/CAD breaking below the 1.3650 support level, with next support at 1.3580. The 50-day moving average at 1.3690 now acts as resistance. Continued CAD strength depends on sustained economic momentum and commodity prices, particularly oil, which remains supportive above $78/barrel.