TORONTO: The Canadian dollar held on to much of its monthly gain against its US counterpart on Friday as investors bet the global economy would avoid recession and Canadian GDP data did little to alter expectations for Bank of Canada interest rate cuts.

The loonie was trading 0.1% lower at 1.35 to the US dollar, or 74.07 US cents, as the US dollar clawed back some recent declines against a basket of major currencies.

Still, the Canadian currency was up 2.3% for the month, its biggest monthly gain since December.

The move in August was driven by broad-based weakness in the US dollar, said Erik Nelson, a macro strategist at Wells Fargo Securities in London.

“It tracks with widespread pricing of a global ‘soft landing’ with inflation receding, growth expectations and risk assets still elevated and central banks firmly on the path to lower rates,” Nelson said.

Canada’s economy grew at an annualized rate of 2.1% in the second quarter, beating estimates for a gain of 1.6%. Still, the mix of growth, which was led by government expenditures, failed to impress some economists, while monthly data showed activity stalling in June and likely again in July.

The BoC will cut its benchmark rate by 25 basis points for a third straight meeting on Sept. 4 and again in October and December, faster reductions in borrowing costs than previously thought, according to a majority of economists canvassed in a Reuters poll.