The Canadian dollar strengthened against its U.S. counterpart on Friday as domestic data showed the economy grew in April and May, but the currency still posted its second straight quarterly decline.
The loonie was trading 0.3% higher at 1.3665 per U.S. dollar, or 73.18 U.S. cents, regaining some ground after hitting 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 it fell 0.9% for the second quarter.
Canada’s gross domestic product increased 0.3% in April, matching market expectations, as growth rebounded in sectors such as wholesale trade and manufacturing, while an advanced estimate showed that the economy grew another 0.1% in May.
“After struggling to grow in the last three quarters of 2023, the Canadian economy is taking a bit more of a beating since the start of the year,” said Doug Porter, chief economist at BMO Capital Markets, in a note.
“Overall, growth holds up somewhat better than expected in 2024, but remains generally lackluster.”
Investors see there as being about a 45% chance the Bank of Canada will further ease monetary policy in its next decision on July 24, up from a 65% chance ahead of higher-than-expected domestic inflation data on Tuesday.
The U.S. dollar edged lower against a basket of major currencies, giving up some recent gains, as U.S. inflation data reinforced expectations the Federal Reserve will start cutting interest rates this year.
Canadian bond yields were mixed across a steeper curve in a shortened session ahead of a Canada Day market holiday on Monday.
The 10-year was up 3.1 basis points at 3.507%, nearing the two-week high it touched in Thursday’s session at 3.522%. (Reporting by Fergal Smith)
