TORONTO: The Canadian dollar strengthened against its US counterpart on Friday, clawing back much of its weekly decline, as investor sentiment picked up and preliminary domestic data showed retail sales rebounding in April.
The loonie was trading 0.6% higher at 1.3650 to the US dollar, or 73.26 US cents, a day after it touched a two-week low intraday at 1.3743. For the week, it was down 0.3%.
The currency rose as a University of Michigan survey showed consumers’ inflation expectations improved in late May, boosting prospects the Federal Reserve would begin easing policy by September.
“It just seems like the minute that there’s something weaker than expected, the market wants to front-run a Fed turn,” said Erik Bregar, director, FX & precious metals risk management at Silver Gold Bull.
Wall Street stocks rallied and the price of oil, one of Canada’s major exports, rose after four straight days of declines. US crude oil futures were up 1.2% at $77.79 a barrel.
“This is going to be a bullish close for CAD today. I wouldn’t be surprised if it starts next week a little stronger,” Bregar said.
Canadian retail sales contracted for a third consecutive month in March, falling 0.2%, underscoring the impact of high interest rates on consumer spending. Still, a preliminary estimate of April’s sales figure showed sales were likely to increase by 0.7%.
On Tuesday, data showed Canada’s annual inflation rate falling to a three-year low of 2.7% in April, raising expectations the Bank of Canada would begin cutting rates at its next policy decision on June 5. Swap markets see a 60% chance of a June cut.
Canadian government bond yields were mixed across a more deeply inverted curve, with the 2-year rising 3.1 basis points to 4.248%.
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