It is now clear that markets see a very direct link between the Bank of Canada and Fed policy trajectory, and the pro-cyclical trades induced by softer US data often rewarded other high-beta G10 currencies (NOK, SEK, AUD, NZD) more than CAD. 

We suspect today’s retail sales out of Canada won’t impact CAD as much as the upcoming US releases, which may remain the case as long as the USD retains its strength. 

Ultimately, a USD decline and CAD’s rate attractiveness should send the pair back to 1.3000 by the second half of this year, but we still think the market is underpricing BoC easing, and CAD looks less attractive than its oil-peer NOK this year also from a valuation perspective.