01/27/2015 08:40 EST | Updated 03/29/2015 05:59 EDT

Loonie rises after five losing sessions, traders look to GDP data, Fed meeting

TORONTO - The Canadian dollar closed higher Tuesday as oil and gold prices registered solid gains and traders looked to see how the Canadian economy performed in November.

The loonie was up 0.39 of a cent to 80.62 cents US following five straight sessions of declines that had left Canada's dollar down almost seven per cent year to date.

Falling oil prices and a surprise interest rate cut by the Bank of Canada have weighed heavily on the currency.

The loonie has also lost value amid speculation that the central bank may make another cut to its key overnight rate after surprising the financial community last week when it cut the rate by a quarter-point to 0.75 per cent.

"The market is pricing in a 16 per cent chance of an interest rate cut at the March meeting and a 68 per cent probability of a cut within the next year," observed Camilla Sutton, chief FX strategist, managing director, Scotiabank Global Banking and Markets.

"We expect BoC policy to introduce additional volatility into the Canadian dollar."

The plunge in oil prices has weakened the Canadian economy but this likely won't be reflected in November gross domestic product figures coming out Friday. Statistics Canada is expected to report that GDP rose by 0.1 per cent over the month.

Oil prices, already on a slide, started to collapse at the end of November after Saudi Arabia ruled out production cuts. Since then, oil has plunged about 40 per cent but seems to have found some stability around the US$45 a barrel mark.

Reflecting that rapid drop in prices, TD Bank on Monday downgraded its economic forecast. The bank now expects the Canadian economy to grow by two per cent this year compared with its expectation in December for growth of 2.3 per cent. TD said it also expects the Bank of Canada to cut its overnight rate by another quarter of a percentage point in March.

Other economic events of note this week include the U.S. Federal Reserve's scheduled announcement on interest rates on Wednesday.

Traders will also take in data on U.S. fourth quarter economic growth on Friday. Economists generally expect that U.S. GDP grew at an annualized rate of 3.1 per cent, down from a five per cent pace in the third quarter.

On the commodity markets, March oil gained 61 cents to US$45.76 a barrel.

February gold gained $12.30 to US$1,291.70 an ounce and March copper dropped eight cents to a fresh 5 1/2 low of US$2.46 a pound amid a rising U.S. currency and demand concerns from China.