TORONTO (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Friday as oil prices dropped, while North American leaders signed a new trade pact and domestic data showed growth in the economy that was in line with expectations.
Canada’s economy grew at an annualized rate of 2.0 percent in the third quarter, matching analysts’ forecasts, data from Statistics Canada showed. Growth slowed from 2.9 percent in the second quarter on lower motor vehicle purchases and falling housing investment.
Some market players were disappointed by the composition of the data and a contraction in gross domestic product for the month of September.
But chances of another Bank of Canada interest rate hike as soon as January were little changed at 70 percent, the overnight index swaps market showed.
The central bank, which has raised interest rates five times since July 2017, will make an interest rate decision next week, but is not seen moving rates.
The leaders of Mexico, Canada and the United States signed a North American trade pact after brinkmanship over the final details of the deal continued through the eve of the signing.
The signing of the agreement could reduce uncertainty for Canada’s economy, but that prospect has been offset since October by a sharp drop in the price of oil, one of Canada’s major exports.
Oil prices fell further on Friday as swelling inventories depressed sentiment despite widespread expectations that Organization of the Petroleum Exporting Countries and Russia would agree on some form of production cut next week.
U.S. crude CLc1 prices were down 1.3 percent at $50.77 a barrel.
At 9:05 a.m. (1405 GMT), the Canadian dollar CAD=D4 was trading 0.2 percent lower at 1.3304 to the greenback, or 75.17 U.S. cents. The currency, which on Wednesday touched a five-month low at 1.3360, traded in a range of 1.3273 to 1.3331.
The decline for the loonie came as stocks were pressured by investor caution ahead of a much-awaited meeting between the presidents of the United States and China at the G20 Summit, which could determine the fate of the ongoing trade dispute that has roiled financial markets.
In addition to being a major commodities exporter, Canada runs a current account deficit, so its economy could be hurt if the global flow of trade or capital slows.
Canadian government bond prices were higher across a flatter yield curve, with the 10-year CA10YT=RR rising 23 Canadian cents to yield 2.277 percent.
Reporting by Fergal Smith; editing by Jonathan Oatis