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The Canadian dollar CADUSD edged lower against its U.S. counterpart on Tuesday as investors awaited domestic GDP data this week that could guide expectations for Bank of Canada interest rate cuts.

The loonie was trading 0.1 per cent lower at 1.3645 to the U.S. dollar, or 73.29 U.S. cents, after earlier touching its strongest level since last Tuesday at 1.3615.

Canadian gross domestic product data, due on Friday, is expected to show the economy expanding at an annualized rate of 2.2 per cent in the first quarter. That would be slower than the 2.8 per cent pace that the Bank of Canada forecast in April.

“With the population surging, output likely contracted for a seventh consecutive quarter on a per-capita basis, further widening Canada’s performance gap relative to the United States,” Karl Schamotta, chief market strategist at Corpay, said in a note.

Canadian Finance Minister Chrystia Freeland said that last month’s federal budget had created conditions for interest rates to come down.

The swaps market sees a 64 per cent chance the BoC would begin an interest rate-cutting campaign at a policy decision on June 5.

The price of oil, one of Canada’s major exports, rose on the expectation that OPEC+ will maintain crude supply curbs at its June 2 meeting. U.S. crude oil futures settled 2.7 per cent higher at $79.83 a barrel.

Canadian government bond yields moved higher across the curve, tracking moves in U.S. Treasuries, after a U.S. consumer confidence report showed unexpected improvement in May.

The 10-year was up 7.5 basis points at 3.701 per cent.

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