July 31, 2019 / 1:40 PM / a year ago

CANADA FX DEBT-Canadian dollar gains on better-than-expected GDP growth

    * Canadian dollar rises 0.3% against the greenback
    * Canada's GDP grows 0.2% in May
    * U.S. oil prices increase 1%
    * Bond prices move lower across the yield curve

    By Levent Uslu
    TORONTO, July 31 (Reuters) - The Canadian dollar
strengthened against its U.S. counterpart on Wednesday, ahead of
a Federal Reserve interest rate decision, as domestic data
showed that gross domestic product grew more than expected in
    Canada's economy grew by 0.2% in May, beating estimates for
0.1% growth, thanks to a rebound in manufacturing, according to
data from Statistics Canada.             
    The data supported investor expectations that the Bank of
Canada will leave its benchmark interest rate unchanged at 1.75%
this year, after the central bank made clear earlier this month
it had no intention of easing monetary policy, diverging from
some other major central banks.                           
    Money markets are convinced the Fed will cut its benchmark
interest rate by 25 basis points on Wednesday for the first time
since the financial crisis more than a decade ago, but it
remains to be seen whether this is going to be a one-time cut or
whether more reductions will follow.             
    At 9:13 a.m. (1313 GMT), the Canadian dollar          was
trading 0.3% higher at 1.3119 to the greenback, or 76.23 U.S.
cents. The currency traded in a range of 1.3119 to 1.3160.
    Meanwhile, the price of oil, one of Canada's major exports, 
rose for a fifth day, as U.S. inventories dropped and as
investors expect the Fed to lower borrowing costs. U.S. crude
oil futures        were up 1% at $58.65 a barrel.
    Canadian government bond prices were lower across the yield
curve, with the two-year            down 2.5 Canadian cents to
yield 1.546% and the 10-year             falling 19 Canadian
cents to yield 1.514%.    

 (Reporting by Levent Uslu; Editing by Steve Orlofsky)
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