The potential for a weaker-than-expected result in the Canadian retail sales release on Tuesday could finally help pull the Canadian dollar a bit lower.

Rising expectations for an interest rate cut has been the primary culprit for dollar weakness.

The Bank of Canada this week noted that inflation would return to target sooner than expected, but if Friday’s inflation data proves to be unexpected, the Canadian dollar is likely to respond immediately.

Price Headley asks 10 questions to help traders plan their trades.

The US dollar plummeted to fresh record lows on a trade-weighted basis, leaving the euro at all-time highs and the Canadian dollar just short of 33-year peaks. Traders sold the dollar on speculation that the upcoming G7 meeting would provide little guidance on the future of greenback trends.

Many expect more borrowing in 2008, as consumers struggle with tighter credit and potentially higher mortgage payments. Coast to coast, the story is the same. It is the story of an economy late in the credit cycle; it is the story of a downswing, not an up-swing.

The US dollar has strengthened because it tends to benefit in environments of rising risk aversion where we see traders and investors move back to cash and into the safety of the US dollar

It may only be a matter of time before the UK consumer will cut back on discretionary spending, especially as the effects of the Bank of England’s tightening cycle earlier in the year starts to come into play.

Things always go in cycles. Short cycles. Long cycles. But what you never quite know is where you are in the cycle.