The Canadian dollar is climbing after GDP beats

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The Canadian dollar climbed Friday after data showed the economy grew at a slightly faster pace than expected last month.

Gross domestic product in the country rose 0.1% in April,Statistics Canada said Friday, compared with economist expectations for it to stay flat. The economy was lifted by an uptick in manufacturing and housing data.

The loonie was up 0.4% to 1.3216 versus the US dollar at 9 a.m. ET.

Canada had seen slower-than-expected growth in the first three months of 2018, dragged down by a sharp fall in housing investment. But the central bank said it expected housing activity would pick up, bolstered by solid labour income growth.

The Bank of Canada left its key rate unchanged at 1.25% in May, but dropped a reference to remaining “cautious” on monetary policy. With the strong economic data, some think a rate hike at the next monetary policy in July is likely.

Mark McCormick, head of North American FX strategy at TD Securities, said he expected a “marginal downside miss” in April growth. Still, he thought the data would “be upbeat enough to nudge [the central bank] into hiking next month.”

The data comes amid mounting tensions between the US and Canada. President Donald Trump last month refused to extend exemptions to allies, including Canada, on steel and aluminium imports to the US. Canadian Prime Minister Justin Trudeau threatened to hit back with retaliatory tariffs on dozens of US products.

Canada, the US, and Mexico are also in gridlock on NAFTA negotiations. Trade talks have continued, but some analysts doubt that reaching a new deal this year is even possible.

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