By Fergal Smith

(Reuters) -Canada's main stock index climbed on Friday to a one-month high as the energy sector led broad-based gains and domestic data raised investor hopes that the Bank of Canada could pause its interest rate hiking campaign.

The Toronto Stock Exchange's S&P/TSX composite index ended up 252.74 points, or 1.25%, at 20,545.36, its highest closing level since July 31.

For the week, the TSX was up 3.6%, the biggest weekly advance since June. It will be closed on Monday for the Labor Day holiday.

"It looks like the month is off to a strong start," said Elvis Picardo, a portfolio manager at Luft Financial, iA Private Wealth. "Energy seems to be getting its mojo back."

The energy group advanced nearly 2%, taking its rally since June to roughly 25%, as expectations of tightening supplies helped lift oil prices to their highest in over half a year. U.S. crude oil futures settled 2.3% higher at $85.55 a barrel.

Canada's economy unexpectedly contracted in the second quarter at an annualized rate of 0.2% and growth was most likely flat in July, a result that will probably allow the central bank to leave interest rates on hold at a policy announcement next Wednesday.

Separate data suggested that U.S. labor market conditions were easing, cementing expectations that the Federal Reserve will not raise interest rates this month.

"Investors are seizing on every weak data point as a reason for central banks to pause," Picardo said.

All ten major sectors on the Toronto market gained ground. Industrials added 1.3% and heavily weighted financials were up 1.2%.

Canadian Western Bank was a standout. Its shares jumped 11.5% after the lender beat third-quarter profit estimates.

(Reporting by Fergal Smith in Toronto and Shashwat Chauhan in Bengaluru; Editing by Shilpi and Editing by Sandra Maler)