The Canadian dollar continues to depreciate against the U.S. dollar after the U.S. Federal Reserve published the minutes from its April Federal Open Market Committee (FOMC) meeting on Wednesday. The notes were surprisingly hawkish and put the June FOMC back on the table as a possibility of a Rate hike. The interest rate divergence that had been eroded as the Fed took a more patient tone in their communications once again gave the USD an edge.

Canadian Retail Sales fell in March to 1.0 percent and 0.3 percent for the core reading. Home furnishing and auto sales lead the drop as retail sales figures in Canada broke a two month streak of gains. The first quarter gross domestic product is still expected to show a strong surge even though March slowed down, but the latest economic data is raising concerns about the second quarter as the Alberta wild fires will put a significant damper on growth that could go beyond the quarter.

The price of oil has been volatile with price swing of 7.3 percent between the high and low of the week. The disruptions in output from Canada, Libya and Nigeria have boosted the price of crude, while fears of oversupply once again crashing the black gold party keep the price below $50. Despite Goldman Sachs believing there is now less concerns of a supply glut, the more the price recovers will trigger production from North America.

The USD/CAD has gained 0.188 percent in the last 24 hours. The loonie has been weaker after the release of lower retail sales data and a rise in inflation. The pair is trading at 1.3147 and white an emphasis on fundamental data after the FOMC release the CAD is on the back foot. The Bank of Canada (BoC) will issue a Rate Statement on Wednesday, but is not expected to change the interest rate. The central bank has said that it is waiting for the effects of the budget introduced in March by the Liberal government to impact the economy before making its next move.

The BoC is anticipated to bring a more dovish rhetoric to its rate statement on its May policy meeting. The raging wild fire in Alberta and disappointing economic data will give the bank plenty of topics on why the economy is underperforming. A Reuters survey of economists see the next move by Governor Poloz is to raise rates next year, rather than cut them in 2016. The BoC cut rates twice in 2015 and so far has refrained from easing awaiting the effects of the fiscal stimulus announced in March.

The wildfires in Alberta though devastating are seen as a temporary setback for the economy that get itself back on track towards the end of the year. The aftermath of the FOMC minutes put fundamental indicators back in the forefront as the gap between the Fed is doing and the Fedspeak is shrinking putting more emphasis on economic data and less on rhetoric. Canadian data could drive the CAD lower if the current trend of underperforming releases continues.

Forex Market events to watch this week:

Monday, May 23
Victoria Day Holiday
Wednesday, May 25
10:00am CAD BOC Rate Statement
10:00am CAD Overnight Rate
10:30am USD Crude Oil Inventories
Thursday, May 26
8:30am USD Core Durable Goods Orders m/m
8:30am USD Unemployment Claims
Friday, May 27
8:30am USD Prelim GDP q/q

*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar