The Canadian dollar strengthened to a near eight-month high against the greenback on Friday after domestic data supported the view that the Bank of Canada will not be cutting interest rates over the coming months.
Canada’s economy grew by 0.3 per centin April, Statistics Canada data indicated, faster than the 0.1 per cent pace that analysts had predicted, while a business outlook survey by the Bank of Canada showed that Canadian firms expect an increase in sales growth over the coming year.
“The Canadian economy is suddenly an outperformer in a world dominated by uncertainty,” said Adam Button, chief currency analyst at ForexLive. “The data underscores that the Bank of Canada will not be cutting rates any time soon.”
Chances of an interest rate cut by the Bank of Canada this year fell to about 30 per cent from more than 40 per cent before the data, the overnight index swaps market indicated.
Money markets expect at least two rate cuts from the U.S. Federal Reserve over the same period.
At 11:55 a.m., the Canadian dollar was trading 0.1 per cent higher at 1.3087 to the greenback, or 76.41 U.S. cents. The currency touched its strongest level since Nov. 7 last year at 1.3060.
For the month, the loonie was up 3.3 per cent.
The price of oil, one of Canada’s major exports, edged lower ahead of talks over the trade dispute between the U.S. and Chinese presidents this weekend and on production cuts from OPEC on Monday. U.S. crude oil futures were down 0.1 per cent at $59.38 a barrel.
Canadian government bond prices were mixed across the yield curve, with the two-year down 3 cents to yield 1.471 per cent and the 10-year rising 3 cents to yield 1.471 per cent.
On Thursday, the 10-year yield touched its highest intraday in more than two weeks at 1.522 per cent.
The Canadian bond market was due to close early ahead of the Canada Day holiday on Monday.
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