CANADA FX DEBT-C$ weak ahead of Bank of Canada news; ECB eyed
* Canadian dollar at C$1.0910 or 91.66 U.S. cents * Bond prices lower across the maturity curve By Alastair Sharp TORONTO, June 3 (Reuters) - The Canadian dollar weakened against the greenback on Tuesday as the market braced for a slew of potentially jarring events and economic data, including a Bank of Canada policy decision on Wednesday. On Thursday, the European Central Bank is likely to act to try to stimulate the common market's economy and stave off deflation. Jobs data for both Canada and its main trading partner, the United States, are due on Friday. "There's a lot of waiting on the Bank (of Canada), there's a lot of waiting on the ECB, and then the North American employment reports on Friday," said Darcy Browne, managing director of foreign exchange sales at CIBC World Markets. In Canada, the central bank shifted to a neutral policy stance late last year as it cited a weak inflation environment, a move that has weighed on the loonie. A pickup in the domestic inflation rate in April, however, had stoked some speculation that the bank could be ready moderate its dovish tone, but disappointing economic growth figures for the first quarter released last week have deflated those expectations. "The Bank of Canada's hands are tied. They're not cutting rates, and they're not hiking," Browne said. "It's just the status quo of (Governor Stephen) Poloz trying to keep this rhetoric alive and the Canadian dollar weaker." A weak currency would normally stimulate Canadian exports, which is a development the central bank has been waiting for. A Reuters poll released on May 29 showed a majority of analysts expect rates to be held steady until mid-2015, with most forecasting an eventual hike. "The first-quarter GDP data in our view gives them a little bit more wiggle room to still sound fairly cautious," said David Tulk, chief Canada macro strategist at TD Securities in Toronto. "If anything, maybe some of the weakness that we have seen in the Canadian dollar over the last couple of days is in recognition that the Bank of Canada does not have to specifically reference some of the inflation strength, they can still hide behind the weaker growth story." The Canadian dollar ended the session at C$1.0910 to the greenback, or 91.66 U.S. cents, weaker than Monday's close of C$1.0898, or 91.76 U.S. cents. The loonie has been stuck in a narrow trading range in recent weeks, but Monday's drop brought it close to breaking out of that band. A close above C$1.0930 would have set the currency up for further declines, said Tulk, while CIBC's Browne looked to C$1.0940 as a gateway to further upside in the pair. Canadian government bond prices were lower across the maturity curve, with the two-year down 2 Canadian cents to yield 1.074 percent and the benchmark 10-year down 55 Canadian cents to yield 2.341 percent. (Additional reporting by Leah Schnurr; Editing by Meredith Mazzilli; and Peter Galloway)
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