Canadian Dollar on Course for Fourth Consecutive Monthly Gain as GDP Surpasses Expectations
TORONTO, May 30, 2025 – The Canadian dollar, also referred to as the "loonie," is on track to secure its fourth consecutive monthly gain, boosted by stronger-than-anticipated economic growth. As of Friday, the loonie rose 0.4% against the U.S. dollar, trading at 1.3750 per USD, which translates to approximately 72.73 U.S. cents. This positive trend signifies the longest winning streak for the currency in four years, as it is set to end the month up by approximately 0.3%.
Economic Growth Exceeds Projections
Recent data released earlier this week illustrated that Canada’s gross domestic product (GDP) increased at an annualized rate of 2.2% in the first quarter, surpassing economist forecasts of a 1.7% rise. Significantly, this upturn can be attributed to U.S. companies actively stockpiling Canadian goods ahead of the imposition of tariffs, reflecting robust cross-border trade. Furthermore, the GDP recorded a 0.1% increase in March compared to February, with preliminary estimates indicating a continued gain of 0.1% for April.
Karl Schamotta, chief market strategist at Corpay, noted in a market analysis that the situation favors a decision to maintain interest rates during the upcoming Bank of Canada (BoC) meeting. He stated, "The odds favour a hold at next week’s Bank of Canada meeting," highlighting the potential impact of increased household spending power as a result of the previous year’s rate-cutting cycle.
Interest Rate Expectations
As investors look ahead, there is a projected 75% chance that the BoC will keep its benchmark interest rate unchanged at 2.75% in the upcoming policy decision on June 1. The central bank has remained on the sidelines since April, marking a pause in its easing strategy that began last June.
Oil Prices and Bond Yields
In conjunction with the currency’s upswing, the price of oil—one of Canada’s most vital exports—saw a slight decline of 1.2%, settling at $60.20 a barrel. This drop comes as market participants assess the possibility of a more significant output increase from OPEC+ in July.
Meanwhile, the Canadian 10-year yield has remained relatively stable at 3.205%, a trend that coincides with a decrease in U.S. Treasury yields following the release of U.S. inflation data, which aligned with market expectations last month.
Looking Ahead
As the Canadian dollar continues to reflect the resilience of the nation’s economy amidst changing global dynamics, attention will be focused on the forthcoming decisions by the Bank of Canada. With economic indicators displaying robustness and the interest rates poised for observation, analysts eagerly await the developments that could shape Canada’s financial landscape in the coming months.
In summary, the Canadian loonie’s performance this month underscores a strengthening economy, driven by substantial GDP growth and positive market sentiment, paving the way for a pivotal meeting at the Bank of Canada next week.
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