By Fergal Smith
TORONTO (Reuters) -The Canadian dollar weakened against its U.S. counterpart on Friday as optimism waned that Canada would reach a trade deal with the United States before an August 1 deadline and ahead of a Bank of Canada interest rate decision.
The loonie was 0.5% lower at 1.3710 per U.S. dollar, or 72.94 U.S. cents, after trading in a range of 1.3639 to 1.3725. For the week, the currency was on track to gain 0.1%.
The United States may not reach a negotiated trade deal with Canada, U.S. President Donald Trump said, suggesting his administration could set a tariff rate unilaterally. Canada sends about 75% of its exports south of the border.
“Markets are now pricing in a lower chance of a U.S.-Canada deal before August 1,” said Kevin Ford, FX & macro strategist at Convera. “With tariff talks likely dragging on past next Friday, the CAD has bounced back above 1.37.”
The Bank of Canada will hold its overnight interest rate steady at 2.75% on July 30 for the third consecutive meeting thanks to a recent rise in inflation and a fall in unemployment, according to a Reuters poll of economists that still found many expect at least two more cuts this year.
The U.S. dollar advanced against a basket of major currencies after Trump on Thursday said that he did not intend to fire Federal Reserve Chair Jerome Powell, as he has frequently suggested he could.
The price of oil, one of Canada’s major exports, fell 1.4% to $65.11 a barrel on negative economic news, including data that showed new orders for key U.S.-manufactured capital goods unexpectedly fell in June.
Canadian bond yields moved lower across the curve, with the 10-year down 4.1 basis points at 3.515%.
(Reporting by Fergal Smith; Editing by Kirsten Donovan)
