Canadian dollar hits five-week high as data supports rate hike bets
TLT•The Canadian dollar reached a five-week high against the U.S. dollar as oil prices rose and retail sales data supported expectations of a Bank of Canada rate hike next week.
1. Currency gains
The Canadian dollar rose 0.1% to 1.40 per U.S. dollar, or 71.43 U.S. cents, after reaching 1.3969, its strongest intraday level since September 16. It was on track for a seventh straight day of gains and a 1% weekly advance, its biggest since April.
2. Retail sales and rates
Canadian retail sales rose 1.2% in August from July, while a preliminary estimate showed a 0.7% increase in September. Desjardins analyst Oskar Stone said the spending data supported expectations for a rate increase next week and pointed to third-quarter GDP growth of 2%. A majority of economists polled expected the Bank of Canada to raise its benchmark rate by 25 basis points to 2.50% on October 28, with one further hike by the end of March. Investors saw an roughly 80% chance of a hike next week.
3. Oil and bond yields
Oil prices rose after Houthi attacks in Saudi Arabia stoked concern about further disruption to Middle East energy supplies. U.S. crude futures settled 3.8% higher at $103.27 a barrel, while Canada's 10-year bond yield rose 5.1 basis points to 3.838%, tracking moves in U.S. Treasuries.
