The Canadian dollar strengthened to 1.39 per U.S. dollar, extending gains for a third straight week as firmer domestic data narrowed the yield gap with the United States and pushed Canada’s 10-year government bond yield up to 3.68%, near the 3.72% level touched on August 10. Factory sales unexpectedly rose 0.1% in June from May for a fifth consecutive monthly gain and sales volumes increased 1.2%, while recent labor data also pointed to a stronger job market and the economy is estimated to have expanded at an annualized 3.4% in the second quarter, above the Bank of Canada’s 2.5% forecast. The stronger backdrop, alongside softer U.S. retail sales and employment trends, reinforced expectations that the Bank of Canada could raise rates if energy prices remain elevated, even after holding its policy rate at 2.25% in July for a sixth straight meeting and warning that inflation expectations remained elevated despite easing energy-driven price pressures.