TORONTO (Reuters) - The Canadian dollar was little changed against the greenback on Wednesday, with investors unwilling to take aggressive positions ahead of a monetary policy statement from the Bank of Canada due later in the morning.
The announcement from the central bank will be the key domestic event of the week and has been much anticipated by markets since surprisingly strong inflation data released last month.
Investors will be watching to see how the Bank of Canada addresses the inflation environment and if there is any mention of recent strength in the loonie.
Overall, though, analysts expect the bank will likely stick to its neutral tone, particularly after last week's disappointing jobs report for June. Rates are widely forecast to remain at 1 percent.
"What's essentially interesting about today's Bank meeting is how they will potentially change their messaging based on what we've seen in the data over the past couple months," said Greg Moore, senior currency strategist at Royal Bank of Canada in Toronto.
"Inflation that surprised to the upside has been the main thing a lot of people have been pointing to, but low growth is another issue that Governor Poloz and the Bank of Canada are likely to emphasize a bit more today."
The Canadian dollar was at C$1.0762 to the greenback, or 92.92 U.S. cents, a tad weaker than Tuesday's close of C$1.0758, or 92.95 U.S. cents.
The central bank will release its statement at 10:00 am ET and will give its updated projection for inflation and economic growth at the same time. The releases will be followed by a press conference by Governor Stephen Poloz.
If the Bank of Canada does maintain its neutral to dovish message, that would be a negative for the Canadian dollar and could push the currency into the low C$1.08s, said Moore.
After a rally of 1.6 percent through June, the loonie's momentum stalled last week as it was hit hard by a report that showed the economy lost jobs last month.
The loonie saw little reaction to data earlier on Wednesday that showed the value of Canadian factory sales jumped by 1.6 percent in May, more than economists had expected.
Canadian government bond prices were mostly lower across the maturity curve, with the two-year down half a Canadian cent to yield 1.102 percent and the benchmark 10-year off 1 Canadian cent to yield 2.216 percent.
Editing by Nick Zieminski