* Canadian dollar at C$1.2960, or 77.16 U.S. cents
* Loonie rises 0.2 percent for week
* Price of U.S. oil falls 1.8 percent
* Canada-U.S. 10-year spread widens by 7.9 basis points
By Fergal Smith
TORONTO, June 1 (Reuters) - The Canadian dollar was little changed against the greenback on Friday as the prospect of a Bank of Canada interest rate hike in July offset escalating trade tensions between Canada and the United States.
At 4 p.m. EDT (2000 GMT), the Canadian dollar CAD=D4 was near flat at C$1.2960 to the greenback, or 77.16 U.S. cents. The currency traded in a range of C$1.2931 to C$1.3009.
"It is mostly about the two-way risks around the Bank of Canada presenting a view that they are going to most likely hike rates in July versus a very weak GDP report alongside the renewed tensions around trade and tariffs," said Mark McCormick (NYSE:MKC), North American head of FX strategy at TD Securities. "It leaves us relatively bearish."
President Donald Trump fired back at Canada after Ottawa and other American allies retaliated against Washington's steel and aluminum tariffs and he appeared to threaten possible action against Canada's lumber industry. also said he might prefer to end the North American Free Trade Agreement, which the United States is renegotiating with Canada and Mexico, in favor of two bilateral agreements. the week, the loonie rose 0.2 percent. It was boosted on Wednesday by a more-hawkish-than-expected policy statement from the Bank of Canada BOCWATCH .
Data on Thursday showed Canada's economy grew at a weaker-than-expected pace in the first quarter. But growth in the Canadian manufacturing sector accelerated in May to its fastest pace in more than seven years as new orders and inventories climbed, data on Friday showed. have cut bearish bets on the Canadian dollar, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed. As of May 29, net short positions fell to 15,690 contracts from 26,212 a week earlier.
The price of oil, one of Canada's major exports, was pressured by a stronger U.S. dollar on Friday. U.S. crude oil futures CLc1 settled 1.8 percent lower at $65.81 a barrel. U.S. dollar .DXY was helped by data showing U.S. job growth accelerated in May. government bond prices were mixed across the yield curve, with the 10-year CA10YT=RR falling 1 Canadian cent to yield 2.247 percent. The gap between Canada's 10-year yield and its U.S. equivalent widened by 7.9 basis points to a spread of -65.5 basis points, the widest since March 20.