USD/CAD posts fresh two-week low near 1.4160 after dismal US Retail Sales data

• USD/CAD refreshes a two-week low near 1.4160 as the US Dollar weakens on the faster-than-expected decline in the US Retail Sales data for January.
• Poor US Retail Sales data could boost Fed dovish bets
• Canadian Manufacturing Sales grew at a slower-than-expected pace of 0.3% in December.

The USD/CAD pair extends its downside and posts a fresh two-week low near 1.4160 in Friday’s North American session. The Loonie pair weakens as the US Dollar (USD) slides further after the release of the poor United States (US) Retail Sales data for January.

The US Census Bureau reported that Retail Sales, a key measure of consumer spending, declined by 0.9%, faster than estimates of 0.1%. In December, the consumer spending measure rose by 0.7%, revised higher from 0.4%.

Technically, a contraction in households’ spending indicates that the purchasing power of individuals has reduced. Such a scenario paves way for monetary policy easing by the Federal Reserve (Fed) as lower consumer spending results in a slowdown in inflationary pressures.

Poor Retail Sales data is expected to force traders to pare bets supporting the Fed to keep interest rates steady in the range of 4.25%-4.50% for longer.

On the contrary, Fed Chair Jerome Powell said in the last policy meeting that monetary policy adjustments will not be appropriate until the central bank sees “real progress in inflation or at least some weakness in the labor market.”

Though the Canadian Dollar (CAD) is outperforming the US Dollar, it remains broadly on the backfoot. The Bank of Canada (BoC) is expected to continue reducing interest rates to ease the deepening risks of inflation undershooting the 2% target.

On the economic front, month-on-month Manufacturing Sales data for December misses estimates. The economic data rose by 0.3%, slower than estimates of 0.6% and the former reading of 0.7%.