The Canadian dollar strengthened against its U.S. counterpart on Friday as domestic data showed the economy grew in both April and May, but the currency still posted its second straight quarterly decline.
The loonie was trading 0.3 percent higher at 1.3665 per U.S. dollar, or 73.18 U.S. cents, regaining some ground after earlier touching its weakest level since June 18 at 1.3734.
For the month, the currency weakened 0.3% as the Bank of Canada became the first G7 central bank to cut interest rates, while in the second quarter it fell 0.9%.
Canada’s gross domestic product rose 0.3% in April, matching market expectations, as growth in sectors such as wholesale trade and manufacturing picked up, while an advance estimate showed the economy expanded another 0.1% in May.
“After struggling to grow at all over the final three quarters of 2023, the Canadian economy is showing a bit more momentum so far this year,” Doug Porter, chief economist at BMO Capital Markets, said in a note.
“Overall, growth is holding up a little better than generally expected in 2024, but remains generally mediocre.”
Investors see a 45% chance that the BoC will ease monetary policy further in its next decision on July 24, compared to 65% before Tuesday’s domestic inflation data, which came in higher than expected.
The dollar fell against a basket of major currencies, giving back some of its recent gains, as U.S. inflation data reinforced expectations that the Federal Reserve would start cutting interest rates this year.
Canadian bond yields were mixed across a steeper curve in a shortened session ahead of a market holiday for Canada Day on Monday.
The 10-year bond rose 3.1 basis points to 3.507%, approaching the two-week high it hit during Thursday’s session at 3.522%. (Reporting by Fergal Smith)
