The Canadian dollar strengthened against its U.S. counterpart on Thursday as U.S. economic data fueled speculation the Federal Reserve will resume interest rate cuts in the coming months, but the loonie’s gains were limited as oil prices fell.
The loonie 
USDCAD was trading 0.1% higher at 1.3970 per U.S. dollar, or 71.58 U.S. cents, after trading in a range of 1.3960 to 1.4004.
“A couple of bond-friendly reports this morning suggests the U.S. economy remained soft heading into the spring while inflation moderated,” Sal Guatieri, a senior economist at BMO Capital Markets, said in a note.
“Should these trends persist, the Fed will likely judge that any tariff-driven rise in inflation will be transitory, and resume lowering rates this summer.”
The U.S. dollar 
DXY lost ground against a basket of major currencies after data showed that U.S. retail sales growth slowed sharply in April, with investors already apprehensive over the economy’s prospects in a trade war.
The price of oil 
CL1!, one of Canada’s major exports, settled 2.4% lower at $61.62 a barrel on expectations for a U.S.-Iran nuclear deal that could result in sanctions being eased and more barrels released onto the global market.
Canadian housing data for April was mixed. Housing starts jumped 30% in April but home sales were unable to rebound following recent weakness.
Separate data, for March, showed manufacturing sales down 1.4% and wholesale trade growing by 0.2%.
Canadian bond yields moved lower across the curve, tracking moves in U.S. Treasuries. The 10-year (CA10YT=RR) was down 10.5 basis points at 3.157%.