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The Canadian dollar CADUSD strengthened against its U.S. counterpart on Tuesday, extending its recovery from a 19-month low, as oil prices rose and domestic retail sales data supported bets for aggressive interest rate hikes by the Bank of Canada.

The loonie was trading 0.5% higher at 1.2920 to the greenback, or 77.40 U.S. cents, the biggest gain among G10 currencies.

On Friday, it touched its weakest since November 2020 at 1.3078 as investors worried that the Federal Reserve’s move last week to a more hawkish expected path for interest rate hikes could derail economic growth.

“The reality is that the Bank of Canada is going to be just as aggressive as the Fed,” said Tony Valente, senior FX dealer at AscendantFX.

“Today’s better-than-expected retail sales report reinforces this view and reminds us that Canada’s economy is the best performing economy in the G7.”

Canadian retail sales rose 0.9% in April, beating forecasts of a 0.8% gain and including higher volumes. A preliminary estimate showed that sales were up 1.6% in May.

The Organisation for Economic Co-operation and Development forecast this month that Canada’s economy would grow 3.75% in 2022, the highest rate among G7 countries.

Money markets see about a 75% chance that the Bank of Canada would raise interest rates by three quarters of a percentage point next month, which would be its biggest hike in 24 years.

Canadian inflation data for May, due on Wednesday, could offer further clues on the rate outlook.

Gains for the loonie came as Wall Street rebounded after a sharp sell-off last week, while the price of oil, one of Canada’s major exports, was boosted by high summer fuel demand. U.S. crude prices settled nearly 1% higher at $110.65 a barrel.

The Canadian 10-year rose 4.4 basis points to 3.503%, tracking the move in U.S. Treasuries.

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