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File photo of Canadian dollars.Jeff McIntosh/The Canadian Press

The Canadian dollar closed higher Tuesday as economic growth in February came in stronger than expected.The loonie was up 0.41 of a cent to 99.26 cents (U.S.) as Statistics Canada reported that gross domestic product grew by 0.3 per cent from January. That was better than the 0.2 per cent rise economists had expected. The reading translates to annualized growth of 1.7 per cent.

GDP growth in January was revised higher to 0.3 per cent from 0.2 per cent.

Traders also looked to the start of a two-day U.S. Federal Reserve meeting. Markets have become increasingly convinced that the U.S. central bank is in no hurry to end its current stimulus programs amid a combination of low inflation and modest U.S. economic growth.

The Fed has said it plans to keep its key short-term interest rate near zero at least until the unemployment rate dips below 6.5 per cent from its current 7.6 per cent.

It's also been buying $85-billion a month in Treasuries and mortgage bonds to try to keep long-term borrowing rates down, a move known as quantitative easing.

Expectations are higher for the European Central Bank when its meets Thursday.

The expectation that the ECB will cut its main interest rate from the already all-time low of 0.75 per cent has grown after figures Tuesday showed euro zone unemployment hitting another record high of 12.1 per cent.

Also, inflation rose 1.2 per cent in the year to April, way down from the 1.7 per cent rate recorded in March and markedly below analysts' expectations for a modest decline to 1.6 per cent. It was also well below the ECB's target of keeping inflation "close to but below" 2 per cent.

Commodity prices were mainly lower following a string of advances as June crude on the New York Mercantile Exchange fell $1.04 to $93.46 a barrel.

July copper on the Nymex slipped 4 cents to $3.19 a pound while June gold bullion was ahead $4.70 at $1,472.10 an ounce.

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