*Canadian dollar rises 0.6% against the greenback*Canadian retail sales climb 1.1% in April*Price of U.S. oil settles 1.9% higher*Canada-U.S. 2-year s
*
Canadian dollar rises 0.6% against the greenback
*
Canadian retail sales climb 1.1% in April
*
Price of U.S. oil settles 1.9% higher
*
Canada-U.S. 2-year spread narrows by 5 basis points
(Updated at 3:20 p.m. ET (1920 GMT)
By Fergal Smith
TORONTO, June 21 (Reuters) – The Canadian dollar strengthened to a nine-month high against its U.S. counterpart on Wednesday as oil prices rose and stronger-than-expected domestic retail sales data bolstered bets for an additional Bank of Canada interest rate hike.
Canadian retail sales climbed 1.1% in April, beating the median forecast for a 0.2% increase, and will likely post another gain in May, Statistics Canada data showed.
“This data reinforces the case for a Bank of Canada rate hike in July,” said Tony Valente, senior FX dealer at AscendantFX. “The Canadian consumer’s spending power remains strong in the face of tightening economic conditions.”
The Bank of Canada agreed that the need for further rate hikes would be determined by fresh economic data after it lifted rates to a 22-year high of 4.75% earlier this month, minutes from the central bank’s policy meetings showed.
Money markets see a 72% chance that the BoC will tighten further at the next policy decision on July 12, up from 64% before the data.
The Canadian dollar was trading 0.6% higher at 1.3160 to the greenback, or 75.99 U.S. cents, after touching its strongest intraday level since September at 1.3158.
Adding to support for the loonie, the price of oil, one of Canada’s major exports, settled 1.9% higher at $72.53 a barrel and the U.S. dollar fell against a basket of major currencies after comments by Federal Reserve Chair Jerome Powell failed to live up to the more hawkish market expectations.
Canadian government bond yields rose across the curve. The 2-year yield was up 5.9 basis points at 4.641%, while the gap between it and the U.S. 2-year narrowed by 5 basis points to 6.6 basis points in favor of the U.S. bond. (Reporting by Fergal Smith; editing by Jonathan Oatis)
finance.yahoo.com