CANADA FX DEBT-C$ softens as US$ rallies on Fed outlook, GDP data
(Adds comments, closing figures, details) * Canadian dollar at C$1.3010 or 76.86 U.S. cents * Bond prices higher across the maturity curve By Solarina Ho TORONTO, July 30 (Reuters) - The Canadian dollar retreated against a rallying greenback on Thursday as markets cheered the Federal Reserve's relatively upbeat outlook for the U.S. economy and solid U.S. economic growth data. Figures showed U.S. growth accelerated to a 2.3 percent annual rate in the second quarter, with a large upward revision of the first quarter to a 0.6 percent gain versus the previously reported 0.2 percent decline. The gross domestic product data supported the view that the Fed is set to raise interest rates this year, possibly in September. "In my mind, it does raise the odds of a September rate hike well above 50 percent. Now we just need one of the two employment reports to be good, and neither China, nor Greece to fall off cliff, and we're there," said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York. The strong U.S. dollar also pushed the price of crude oil, a major Canadian export, lower, which put further pressure on the loonie. Canadian dollar finished at C$1.3010 to the greenback, or 76.86 U.S. cents, weaker than the Bank of Canada's official close of C$1.2944, or 77.26 U.S. cents, on Wednesday. The loonie retreated as far as C$1.3045, or 76.66 U.S. cents, during the North American session. In Canada, data from Statistics Canada showed nonfarm payroll jobs rose by 16,500 in May, a slightly slower pace than April's 27,600 increase, with the largest gains seen in the accommodation and construction sectors. The separate Labor Force Survey previously released by the agency had shown the economy added 58,900 jobs in May. Some economists say the payrolls report may be more accurate than the widely watched labor force survey. Anderson says the Canadian dollar could hit between C$1.33 and C$1.35 in September if the Fed opts to raise interest rates that month. Canadian government bond prices were higher across the maturity curve, with the two-year price up 1 Canadian cent to yield 0.455 percent and the benchmark 10-year rising 25 Canadian cents to yield 1.492 percent. The Canada-U.S. two-year bond spread widened to -27.3 basis points, while the 10-year spread widened to -77.1 basis points. (Reporting by Solarina Ho; Additional reporting by Leah Schnurr; Editing by Peter Galloway)
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