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TORONTO: The Canadian dollar strengthened against its US counterpart on Wednesday, ahead of a Federal Reserve interest rate decision, as domestic data showed that gross domestic product grew more than expected in May.

Canada's economy grew by 0.2% in May, beating estimates for 0.1% growth, thanks to a rebound in manufacturing, according to data from Statistics Canada.

The data supported investor expectations that the Bank of Canada will leave its benchmark interest rate unchanged at 1.75% this year, after the central bank made clear earlier this month it had no intention of easing monetary policy, diverging from some other major central banks.

Money markets are convinced the Fed will cut its benchmark interest rate by 25 basis points on Wednesday for the first time since the financial crisis more than a decade ago, but it remains to be seen whether this is going to be a one-time cut or whether more reductions will follow.

At 9:13 a.m. (1313 GMT), the Canadian dollar was trading 0.3% higher at 1.3119 to the greenback, or 76.23 US cents. The currency traded in a range of 1.3119 to 1.3160.

Meanwhile, the price of oil, one of Canada's major exports, rose for a fifth day, as US inventories dropped and as investors expect the Fed to lower borrowing costs. US crude oil futures were up 1% at $58.65 a barrel.

Canadian government bond prices were lower across the yield curve, with the two-year down 2.5 Canadian cents to yield 1.546% and the 10-year falling 19 Canadian cents to yield 1.514%.

Copyright Reuters, 2019