TORONTO (Reuters) - The Canadian dollar strengthened to a near eight-month high against the greenback on Friday after domestic data supported the view that the Bank of Canada will not be cutting interest rates over the coming months.
Canada’s economy grew by 0.3% in April, Statistics Canada data indicated, faster than the 0.1% pace that analysts had predicted, while a business outlook survey by the Bank of Canada showed that Canadian firms expect an increase in sales growth over the coming year.
“The Canadian economy is suddenly an outperformer in a world dominated by uncertainty,” said Adam Button, chief currency analyst at ForexLive. “The data underscores that the Bank of Canada will not be cutting rates any time soon.”
Chances of an interest rate cut by the Bank of Canada this year fell to about 30% from more than 40% before the data, the overnight index swaps market indicated. BOCWATCH
Money markets expect at least two rate cuts from the U.S. Federal Reserve over the same period. FEDWATCH
At 11:55 a.m. (1555 GMT), the Canadian dollar CAD=D4 was trading 0.1% higher at 1.3087 to the greenback, or 76.41 U.S. cents. The currency touched its strongest level since Nov. 7 last year at 1.3060.
For the month, the loonie was up 3.3%.
The price of oil, one of Canada’s major exports, edged lower ahead of talks over the trade dispute between the U.S. and Chinese presidents this weekend and on production cuts from OPEC on Monday. U.S. crude oil futures CLc1 were down 0.1% at $59.38 a barrel.
Canadian government bond prices were mixed across the yield curve, with the two-year CA2YT=RR down 3 Canadian cents to yield 1.471% and the 10-year CA10YT=RR rising 3 Canadian cents to yield 1.471%.
On Thursday, the 10-year yield touched its highest intraday in more than two weeks at 1.522%.
The Canadian bond market was due to close early ahead of the Canada Day holiday on Monday.
Reporting by Fergal Smith; Editing by Nick Zieminski and Susan Thomas