The Canadian dollar edged higher against its U.S. counterpart on Thursday, led by higher oil prices, but the move was limited ahead of U.S. inflation data and the national GDP report.
The loonie was trading 0.1% higher at 1.3690 per U.S. dollar, or 73.05 U.S. cents, after trading in a range of 1.3677 to 1.3712.
Investors are awaiting Friday’s release of the U.S. Personal Consumption Expenditures Price Index, the Federal Reserve’s preferred inflation gauge, as well as Canadian GDP data for the month of April. Economists expect the Canadian economy to grow by 0.3%.
The data is unlikely to derail further interest rate cuts from the Bank of Canada, said Aaron Hurd, senior portfolio manager in the currencies group at State Street Global Advisors, adding that the BoC has been clear on the fact that “there is room for things to recover and for there to still be steady disinflation.”
Earlier this month, the BoC became the first G7 central bank to ease policy, cutting its benchmark rate by 25 basis points to 4.75%. Investors see a roughly 40% chance of another cut in July.
“The U.S. still benefits from higher rates, stronger growth and a safe-haven supply,” Mr. Hurd said. “The divergence with the Bank of Canada and the Fed…I still think that risks taking us over the 1.40 mark.”
The price of oil, one of Canada’s top exports, rose as supply disruption risks from growing geopolitical tensions in the Middle East helped counter demand fears. U.S. crude oil futures settled at $81.74 a barrel, up 1%.
Canadian government bond yields fell across the curve, following movements in U.S. Treasuries. The 10-year was down 1.8 basis points at 3.472% after reaching its highest level since June 10 at 3.522%. (Reporting by Fergal Smith; Editing by Sandra Maler)
