The Canadian dollar strengthened to a two-week high against its US counterpart on Thursday, as the greenback broadly declined and trade data added to evidence that Canada's economy is picking up. Rising exports and falling imports helped shrink Canada's trade deficit in goods in April to C$966 million, Statistics Canada said, in the latest sign the economy is recovering from a slowdown. April's trade deficit was the smallest since October last year.
"I think in general the data from Canada has been supportive (of the Canadian dollar), even the latest GDP figures, which showed solid domestic demand and a good March monthly GDP, showing the economy perhaps regained momentum going into Q2," said Eric Viloria, an FX strategist at Crédit Agricole CIB. The pace of purchasing activity in Canada showed steady growth in May as a measure of employment rose to a nine-month high, according to Ivey Purchasing Managers Index data.
Canada's jobs report for May is due on Friday. The US dollar, which has been pressured this week by speculation that the Federal Reserve would cut interest rates, lost ground against a basket of major currencies. The decline for the greenback came as the ECB refrained from hinting at an interest rate cut, boosting the euro.
At 2:57 pm. (1857 GMT), the Canadian dollar was trading 0.3% higher at 1.3371 to the greenback, or 74.79 US cents. The currency touched its strongest level since May 22 at 1.3360. Still, the Canadian dollar is likely to strengthen less than previously expected against its US counterpart over the coming year, because of more attractive valuations and better prospects for return in other currencies, a Reuters poll showed.