Canadian dollar hits four-week high as rate-cut bets fall on higher inflation GlobeInvestor
The Canadian dollar strengthened to a four-week high against the greenback on Wednesday as bets on a Bank of Canada interest rate cut this year were checked by domestic data showing higher underlying inflation and a narrower trade deficit.
Canada’s annual inflation rate edged up to 1.9 per cent in March from 1.5 per cent in February, while two out of three of the Bank of Canada’s measures of core inflation edged up into the 2.0 per cent range, Statistics Canada data indicated. Separate data from Statistics Canada showed Canada’s trade deficit declined for a second straight month in February, falling slightly to $2.9 billion, after reaching a record high of $4.8 billion in December 2018.Chances of an interest rate cut this year fell to less than 20 per cent from about 25 per cent before the data, the overnight index swaps market indicated.
At 9:27 a.m., the Canadian dollar was trading 0.4 per cent higher at 1.3293 to the greenback, or 75.23 U.S. cents. The currency touched its strongest intraday level since March 20 at 1.3275.The price of oil, one of Canada’s major exports, was boosted by China’s data and a fall in U.S. crude stocks which defied expectations and signalled firm demand.
Canadian government bond prices were lower across the yield curve, with the two-year down 7.5 cents to yield 1.673 per cent and the 10-year falling 34 cents to yield 1.823.The gap between Canada’s two-year yield and its U.S. equivalent narrowed by 4 basis points to a spread of 74 basis points in favor of the U.S. bond.
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