Canada: Dollar Gains for Third Straight Week.

The Canadian dollar strengthened to 1.39 per USD, posting a third consecutive weekly gain as yield spreads narrowed. Domestic factory data supported the recent narrowing in the gap between US and Canadian bond yields. The spread between Canada’s 2-year yield and the US equivalent has narrowed by about 17 basis points this month. Canadian factory sales rose 0.1% in June from May, marking a fifth consecutive monthly gain, while sales volumes increased 1.2%. Meanwhile, US retail sales unexpectedly fell in July by the most in more than a year. Recent data also showed a stronger Canadian labor market and weaker US employment, reducing expectations for a Federal Reserve rate hike this year while raising the prospect of a BoC hike if energy prices remain elevated. Canada’s economy is estimated to have expanded at an annualized 3.4% in the second quarter, well above the Bank of Canada’s 2.5% forecast.