TORONTO, July 31 (Reuters) – The Canadian dollar edged lower against its U.S. counterpart on Friday, but the currency was still on track for a monthly gain as domestic data showed stronger-than-expected economic growth.
The loonie was trading 0.1% lower at 1.4025 per U.S. dollar, or 71.30 U.S. cents, after trading in a range of 1.4003 to 1.4057. For July, the currency was headed for a gain of 1.2% as the price of oil, one of Canada’s major exports, jumped.
o Canada’s gross domestic product grew by 0.3% in May, eclipsing the 0.2% gain analysts had expected, while a preliminary estimate pointed to annualized second-quarter growth of 3.4%, which would be its best quarterly performance for more than three years.
o “For the Bank of Canada, this will provide them with a bit more evidence that the economy is adapting to the trade uncertainty, and will trim their estimate of slack,” Douglas Porter, chief economist at BMO Capital Markets, said in a note. “But it likely won’t change the bigger picture concerns of fresh tariff threats and lofty energy prices.”
o Investors expect the Bank of Canada to leave its benchmark interest rate on hold over the coming months, while chances of a hike by year-end edged only slightly higher to 68% from 60%, swap market data showed.
o The U.S. dollar rose against a basket of major currencies, recovering some ground after Japanese authorities stepped in to prop up their currency a day earlier.
o U.S. crude oil futures were trading 2.7% higher at $85.83 a barrel, adding to their monthly advance, as reports that some tankers were forced to turn around in the Strait of Hormuz prompted traders to reassess shipping flows through the key waterway.
o Canadian bond yields rose across the curve. The 10-year was up 6 basis points at 3.650%, trading near the top of its range since May.
o Canada’s bond market was set for an early close ahead of Monday’s civic holiday.
(Reporting by Fergal Smith; Editing by Sharon Singleton)
By Fergal Smith