The Canadian dollar gained against its U.S. counterpart on Wednesday as preliminary domestic data showed faster-than-expected economic growth, reducing the Bank of Canada’s prospects of a larger rate cut.
The loonie traded 0.3% higher at 1.3810 per dollar, or 72.41 cents, after hitting its highest level since last Wednesday at 1.3788.
Canada’s gross domestic product rose 0.2% in May, Statistics Canada said. A preliminary estimate for June shows the economy grew 0.1%, bringing the quarterly growth rate to 2.2%.
Last week, the Bank of Canada forecast second-quarter growth of 1.5% while cutting interest rates for the second time since June, cutting the benchmark rate by 25 basis points to 4.50%.
“These latest GDP numbers should put to rest the rumors of a sharp bank delay and the talk of a possible 50 basis point rate cut,” Doug Porter, chief economist at BMO Capital Markets, said in a note.
“Canada’s economy is still walking a fine line between staying afloat and avoiding serious problems, which is consistent with further, measured rate cuts.”
The U.S. dollar lost ground against a basket of major currencies as the Bank of Japan raised interest rates, strengthening the yen, and ahead of a Federal Reserve decision due at 2 p.m. ET (1800 GMT).
Oil prices, one of Canada’s key exports, rebounded from seven-week lows to rise 2.9% to $76.87 a barrel as tensions in the Middle East increased.
Canadian government bond yields were mixed on a flattering curve, with the 2-year rising 2.2 basis points to 3.523%, after earlier hitting its lowest since April 2023 at 3.469%. (Reporting by Fergal Smith, editing by Nick Zieminski)
