December 20, 2017 / 9:47 PM / in 2 months

Domestic wholesale trade data, oil lift Canadian dollar

(Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Wednesday after domestic data showed wholesale trade rose more than expected in October, which could bode well for economic growth at the start of the fourth quarter.

Increased purchases of machinery and equipment, as well as household goods, drove the value of Canadian wholesale trade up 1.5 percent, data showed.

The report also “started shifting expectations for another Bank of Canada rate hike as soon as January,” said Mazen Issa, a senior currency strategist at TD Securities.

The rise could also mean October growth data, due on Friday, comes in stronger than forecast, although Thursday’s retail sales report will also be key, Nick Exarhos, economist at CIBC, wrote in a note.

“I‘m definitely looking for the Canadian dollar to strengthen” this week on the back of the data deluge, TD’s Issa said, but added that it could then reverse course in January as hopes for early 2018 central bank hikes fade and NAFTA risk rises.

The Canadian dollar touched a session high of C$1.2819 after the data was released, its highest since Dec. 15.

At 4 p.m EST (2100 GMT), the Canadian dollar was trading at C$1.2827 to the greenback, or 77.96 U.S. cents, up 0.4 percent.

An uptick in oil prices also lent support to the loonie as crude rose on expectations of a fall in U.S. inventories.

U.S. crude prices were up 0.9 percent to $58.08 a barrel, while Brent crude added 1.2 percent to $64.55.[O/R]O/R]

Canadian government bond prices were largely lower across the maturity curve, with the two-year price down 5.5 Canadian cents to yield 1.634 percent and the benchmark 10-year falling 44 Canadian cents to yield 1.988 percent.

Reporting by Alastair Sharp in Toronto and Leah Schnurr in Ottawa; Editing by Susan Thomas and Peter Cooney

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