The Canadian dollar strengthened to a two-week high against its U.S. counterpart on Thursday, as the greenback broadly declined and trade data added to evidence that Canada’s economy is picking up.
Rising exports and falling imports helped shrink Canada’s trade deficit in goods in April to $966-million, Statistics Canada said, in the latest sign the economy is recovering from a slowdown. April’s trade deficit was the smallest since October last year.
“I think in general the data from Canada has been supportive (of the Canadian dollar), even the latest GDP figures, which showed solid domestic demand and a good March monthly GDP, showing the economy perhaps regained momentum going into Q2,” said Eric Viloria, an FX strategist at Crédit Agricole CIB.
The pace of purchasing activity in Canada showed steady growth in May as a measure of employment rose to a nine-month high, according to Ivey Purchasing Managers Index data.
Canada’s jobs report for May is due on Friday.
The U.S. dollar, which has been pressured this week by speculation that the Federal Reserve would cut interest rates, lost ground against a basket of major currencies. The decline for the greenback came as the ECB refrained from hinting at an interest-rate cut, boosting the euro.
At 2:57 p.m. (1857 GMT), the Canadian dollar was trading 0.3 per cent higher at 1.3371 to the greenback, or 74.79 U.S. cents. The currency touched its strongest level since May 22 at 1.3360.
Still, the Canadian dollar is likely to strengthen less than previously expected against its U.S. counterpart over the coming year, because of more attractive valuations and better prospects for return in other currencies, a Reuters poll showed.
Gains for the loonie on Thursday came as U.S. stocks got a boost from a report that the United States is considering a delay to the imposition of tariffs on Mexican products that President Donald Trump has threatened to put in place on Monday.
Investors worry that the tariffs could undermine chances of a new North American trade deal coming into force. Canada sends about 75 per cent of its exports, including oil, to the United States.
The price of oil rebounded from a five-month low in the previous session. U.S. crude oil futures settled 1.8 per cent higher at $52.59 a barrel.
Canadian government bond prices were lower across much of a flatter yield curve, with the 10-year falling 13 Canadian cents to yield 1.461 per cent.