June 24, 2019 / 9:02 PM / 23 days ago

CANADA FX DEBT-C$ climbs on view BoC will lag easing of G10 peers

 (Adds strategist quotes and details throughout; updates prices)
    * Canadian dollar rises 0.3% against the greenback
    * Price of U.S. oil increases 0.8%
    * Canadian bond prices gain across the yield curve
    * Canada-U.S. 2-year spread narrows by 1.8 basis points

    By Fergal Smith
    TORONTO, June 24 (Reuters) - The Canadian dollar rose
against the greenback on Monday, adding to gains from last week
when domestic data showing inflation at a seven-month high
supported the view that the Bank of Canada would hold off from
interest rates cuts over the coming months.
    In contrast, expectations have been building that the United
States and the euro zone may ease monetary policy as early as
July.                         
    With the exception of Canada and Norway "we have seen a big
dovish shift in policy expectations across the board," said
Alvise Marino, a foreign exchange strategist at Credit Suisse in
New York. "If the data hold up in Canada, there is space for the
Canadian dollar to outperform against other G10 currencies."    
    Last month, the Bank of Canada said there was evidence that
a slowdown in the domestic economy was temporary. Money markets
see about a 50% chance of an interest rate cut by December.
          
    Canada's annual inflation rate rose to 2.4% in May, which
was the first time since October 2018 that the rate had exceeded
the central bank's 2.0% target.                 
    Canada's wholesale trade report for April is due on Tuesday
and April gross domestic product data is due on Friday.
    At 4:15 p.m. (2015 GMT), the Canadian dollar          was
trading 0.3% higher at 1.3182 to the greenback, or 75.86 U.S.
cents. The currency, which rose 1.4% last week, traded in a
range of 1.3178 to 1.3220.
    The loonie has rallied about 3.5% since the start of 2019,
which is the best performance among G10 currencies.
    The U.S. dollar        fell on Monday against its rivals
after sustaining its biggest weekly drop in four months last
week, while the price of oil, one of Canada's major exports, was
boosted by market concerns about the possibility of a conflict
between the United States and Iran.             
    U.S. crude oil futures        settled 0.8% higher at $57.90
a barrel.
    Canadian government bond prices were higher across the yield
curve in sympathy with U.S. Treasuries. The two-year           
rose 4.5 Canadian cents to yield 1.409% and the 10-year
            was up 24 Canadian cents to yield 1.459%.
    The gap between Canada's two-year yield and its U.S.
equivalent narrowed by 1.8 basis points to a spread of 32.8
basis points in favor of the U.S. bond. Last Thursday, the
spread touched 30.8 basis points, which was the smallest gap
since February 2018.

 (Reporting by Fergal Smith; Editing by Steve Orlofsky and Tom
Brown)
  
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