The Canadian dollar (loonie) is pictured in Vancouver, B.C. Thursday, Sept. 22, 2011. THE CANADIAN PRESS/Jonathan Hayward

TORONTO - The Canadian dollar gained more than a cent in midday trading Friday as commodity prices got a boost after European leaders made more progress than expected on the debt crisis and Canada's latest GDP figures showed a slight pick up in growth.

The loonie was up 1.30 cents to 98.12 cents US after eurozone leaders agreed to use the continent's bailout fund to funnel money directly to struggling banks.

"It’s Friday, month-end, quarter-end, a long weekend. The EU has fired a shot across the bow in an attempt to fix everything in one broad brush stroke," said a report from BMO Capital Markets.

"Time will tell how long this risk rally lasts, but for today the markets are clearly celebrating."

Oil surged after eurozone leaders agreed to pump bailout money directly into banks instead of onto the balance sheets of already stressed governments. The decision eased fears of widespread European bank failures that could have hampered lending in other parts of the world.

The measures were a breakthrough for Europe, whose leaders have repeatedly clashed over how to deal with hefty government debts. The deal was struck as borrowing rates in Spain and Italy surged to levels that were considered unsustainable.

The August crude contract gained $4.49 to US$82.18 a barrel on the New York Mercantile Exchange.

Crude has fallen to near eight-month lows and down from US$106 a barrel less than two months ago amid signs that economic growth and oil demand have been slowing in the U.S., Europe and China.

The August gold contract added $46 to US$1,596.40 an ounce, while the July copper contract jumped 15 cents to US$3.47 a pound.

Statistics Canada reported Friday that Canada's economy grew a surprisingly perky 0.3 per cent in April, the first time so far this year it has expanded above an annualized rate of two per cent.

Economists had expected a modest 0.2 uptick in April, following a weak start to the year that resulted in 1.9 per cent annualized growth in the first quarter — well short of the 2.5 per cent growth rate predicted by the Bank of Canada.

“With April’s results now in hand, the Canadian economy will still have to work hard to top the two per cent growth mark, but the chances are quite a bit better than before this report," said Robert Kavcic an economist at BMO Capital Markets.

"Still, given that the Bank of Canada’s 1st half forecast (2.5 per cent in Q1 and Q2) overshot the mark, and with the Fed easing through yearend, we expect the Bank to remain on hold until July 2013.”

Data out of the U.S. showed Americans were more cautious about spending in May as their income increased only slightly, indicating the faltering job market has stoked fears about the economy's health.

The U.S. Commerce Department said consumer spending showed no gain in May, the weakest figure since spending was unchanged in November. Income growth edged up 0.2 per cent, matching the modest April increase.

News from © The Canadian Press, 2012