C$ little changed as market waits for data

TORONTO: The Canadian dollar firmed modestly against the greenback on Wednesday but stayed stuck in its recent trading range as a lack of economic data until later in the week left it without a catalyst to push it decisively in either direction.

Investors were looking ahead to Thursday's domestic current account report and Friday's gross domestic product reading, both for the first quarter. South of the border, GDP will be released on Thursday.

While the loonie has drifted higher so far in May, it has stayed within a slim range as modestly improving economic data has been balanced against the Bank of Canada's neutral policy stance.

"That's the key piece right now for the Canadian dollar is just how the central bank manages to almost dance around what we have, which is an improving fundamental backdrop," said Camilla Sutton, chief currency strategist at Scotiabank in Toronto.

Once the market is clear of this week's data, attention will be turning to the release of the central bank's latest policy statement next week. Following last week's uptick in the inflation rate, investors expect the Bank of Canada could sound less dovish than it has recently.

"That's the offset, is that we really need a shift in tone from the Bank of Canada before we risk a significant Canadian dollar rally from here," Sutton said.

The Canadian dollar was at C$1.0855 to the greenback, or 92.12 US cents, slightly stronger than Tuesday's close of C$1.0861, or 92.07 US cents.

The euro weakened against the loonie as market expectations grew that the European Central Bank will ease monetary policy next week. Those expectations were reinforced by comments from ECB President Mario Draghi earlier in the week that the bank was aware of the risks from prices remaining too low for too long.

The euro was at C$1.4775.

"Pretty much everyone as far as I can gauge has priced in at least an interest rate cut," Sutton said. "I think increasingly the commentary from President Draghi would suggest that there be some kind of targeted measure that would try to relieve some of the credit constraints."

The yield on the benchmark Canadian government 10-year bond fell to its lowest level in nearly a year as bond prices across the maturity curve rose.

The 10-year was up 43 Canadian cents to yield 2.253 percent, its lowest since last June, while the two-year rose 1 Canadian cent to yield 1.050 percent.