* Canadian dollar gains 0.3% against the greenback
* Touches its strongest since July 15 at 1.3636
* Price of U.S. oil falls 2.9%
* Bond yields trade mixed across the curve
TORONTO, Aug 19 (Reuters) – The Canadian dollar
strengthened to a five-week high against its U.S. counterpart on
Monday as hopes the U.S. economy could avoid recession bolstered
sentiment and ahead of domestic inflation data that could guide
expectations for Bank of Canada rate cuts.
The loonie was trading 0.3% higher at 1.3640 to the
U.S. dollar, or 73.31 U.S. cents, after touching its strongest
intraday level since July 15 at 1.3636.
“The Canadian dollar, which increasingly functions as a
proxy for global risk appetite, is gaining as investors pile
into ‘soft landing’ bets and could continue to do so if
tomorrow’s domestic inflation data leaves monetary policy
expectations broadly unchanged,” said Karl Schamotta, chief
market strategist at Corpay.
The S&P 500 and the Nasdaq rose for an eighth straight
session as concerns around an impending U.S. recession abated
and markets zeroed in on Federal Reserve Chair Jerome Powell’s
speech at Jackson Hole later this week.
“Powell is expected to join private-sector observers in
acknowledging growing downside risks in U.S. labour markets
while pointing to a sustained moderation in inflation pressures
– conditionally setting the stage for a rate cut at the central
bank’s September meeting.” Schamotta said.
The BoC has already begun lowering interest rates and says
it’s likely to cut further if inflation cools in line with
forecasts. Canada’s consumer price index report for July, due on
Tuesday, is expected to show inflation slowing to 2.5% from 2.7%
in June.
Canada’s freight rail network could come to a grinding halt
this week, inflicting a huge economic toll after the country’s
two largest railroad operators on Sunday issued lockout notices
to the Teamsters union that represents nearly 10,000 workers.
The price of oil, one of Canada’s major exports, fell
2.9% to $74.45 a barrel, while Canada’s 10-year
yield was little changed at 3.065%.
(Reporting by Fergal Smith, Editing by Nick Zieminski)
