Canadian dollar hits 2-week low as potential rate cut looms

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Canadian dollar loses 0.2% against the greenback

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Touches its weakest since July 2 at 1.3715

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Price of copper falls 3%

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10-year yield rebounds from earlier 3-week low

By Fergal Smith

TORONTO, July 18 (Reuters) – The Canadian dollar weakened to a more-than two-week low against its U.S. counterpart on Thursday as the greenback notched broad-based gains and ahead of domestic retail sales data that could guide expectations for Bank of Canada interest rate cuts.

The loonie was trading 0.2% lower at 1.3715 to the U.S. dollar, or 72.91 U.S. cents, its weakest level since July 2.

Economists expect Canadian retail sales data, due on Friday, to show a decline of 0.6% in May from April.

“Tomorrow’s retail sales could have an influence on short-term direction but the market is looking ahead to next week’s Bank of Canada meeting now,” said Amo Sahota, director at Klarity FX in San Francisco.

“I think inflation coming down is helping to justify a faster rate cut progression.”

Data on Tuesday showed Canada’s annual rate of inflation slowing to 2.7% in June from 2.9% in May. Investors see an 85% chance the BoC would cut its benchmark rate at a policy decision on July 24, swaps market data shows.

Last month, the BoC became the first G7 central bank to ease policy, lowering its benchmark rate by 25 basis points to 4.75%.

The U.S. dollar clawed back some recent losses against a basket of major currencies, including the euro, as the European Central Bank held interest rates steady as was widely expected.

U.S. crude oil futures were little changed at $82.88 a barrel but copper was down 3%, hitting a three-month low. Canada is a major producer of commodities, including copper and oil.

Canadian bond yields edged higher across the curve as U.S. Treasury yields climbed. The 10-year yield was up nearly 1 basis point at 3.356%, after earlier touching its lowest level since June 25 at 3.317%. (Reporting by Fergal Smith, Editing by Nick Zieminski)