CANADA FX DEBT-C$ softens as US$ rallies on Fed outlook, GDP data

Thu Jul 30, 2015 4:55pm EDT
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(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
    The strong U.S. dollar also pushed the price of crude oil, a
major Canadian export, lower, which put further pressure on the
    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)