July 11, 2019 / 8:55 PM / 3 months ago

CANADA FX DEBT-C$ nears 8-month high on diverging U.S. and Canadian rate outlooks

 (Adds strategist quote and details throughout; updates prices)
    * Canadian dollar rises 0.1% against the greenback
    * Canadian new home prices dip 0.1% in May 
    * Price of U.S. oil decreases 0.4%
    * Canadian bond prices fall across a steeper yield curve

    By Fergal Smith
    TORONTO, July 11 (Reuters) - The Canadian dollar firmed
against its U.S. counterpart on Thursday, approaching last
week's eight-month high, as investors focused on the less-dovish
policy guidance coming from the Bank of Canada compared with
that of the Federal Reserve.
    At 4:16 p.m. (2016 GMT), the Canadian dollar          was
trading 0.1% higher at 1.3062 to the greenback, or 76.56 U.S.
cents. The currency, which last Thursday notched an eight-month
high at 1.3038, traded in a range of 1.3042 to 1.3080.
    The outlook for the U.S. dollar        remained grim after
Federal Reserve Chair Jerome Powell's bleak comments on the U.S.
economy, which bolstered expectations of an interest rate cut
later this month.             
    In contrast, the Bank of Canada made clear on Wednesday it
had no intention of easing monetary policy even as it
highlighted the risks that trade wars posed to the global
economy.                 
    "If you look at the relative monetary policy, Canada versus
the U.S., it still looks like divergence," said Erik Bregar,
head of FX strategy at the Exchange Bank of Canada.
    Chances of an interest rate cut this year by the Bank of
Canada were less than 35%, data from the overnight index swaps
market showed. Over the same period, the market expects at least
two rate cuts from the Fed.               
    The price of oil, one of Canada's major exports, fell as
OPEC forecast slower demand for its crude next year. U.S. crude
oil futures        settled 0.4% lower at $60.20 a barrel.
            
    New home prices in Canada declined 0.1% in May, after prices
were flat for the previous three months, Statistics Canada said.
            
    Canadian government bond prices were lower across a steeper
yield curve in sympathy with U.S. Treasuries, after data showed
U.S. underlying consumer prices increased by the most in nearly
1-1/2 years in June.             
    The two-year            fell 3 Canadian cents to yield
1.602% and the 10-year             was down 35 Canadian cents to
yield 1.623%.

 (Reporting by Fergal Smith; Additional reporting by Levent
Uslu; Editing by Peter Cooney)
  
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