CANADA FX DEBT-C$ near 7-week high ahead of central bank moves
* C$ hits C$1.0120 vs US$, or 98.81 U.S. cents * Bond prices edge higher across the curve By Claire Sibonney TORONTO, July 4 (Reuters) - The Canadian dollar hovered near a seven-week high against the U.S. dollar on Wednesday in a very tight range as grim European economic data was offset by hopes of more monetary stimulus from central banks. However, trading activity was subdued with U.S. markets closed for the Independence Day holiday and ahead of policy decisions from the European Central Bank and Bank of England on Thursday. "The U.S. dollar is generally a bit softer but not by anything other than a few ticks," said Adam Cole, global head of FX strategy at RBC Capital Markets in London. "I think we're just seeing a bit of to-ing and fro-ing ahead of the event risks that come up in the next couple days in thin markets with obviously the U.S. being out." Data on Wednesday showed Germany's services sector unexpectedly stagnated in June. And while a contraction in France's services sector eased, business expectations slumped to their lowest in three years, underlining how bleak conditions in Europe are. The reports strengthened expectations the European Central Bank will cut interest rates to a record low on Thursday in a move that could drive stock markets higher and further lift commodities and commodity currencies like the Canadian dollar. Separately, the Bank of England is seen launching a third round of monetary stimulus on Thursday, moving to counter a recession and the effects of a worsening debt crisis in the euro zone just two months after calling a halt to the program. At 8:04 a.m. (1204 GMT), the Canadian currency stood at C$1.0129 versus the U.S. dollar, or 98.73 U.S. cents, slightly firmer than Tuesday's North American close at C$1.0125 versus the U.S. dollar, or 98.77 U.S. cents. Earlier in the session, the domestic currency hit a high of $ 1.0120, or 98.81 U.S. cents, its strongest level since May. 17. Cole expected the Canadian dollar to stick to a narrow range between C$1.0120-C$1.0150 heading into Thursday. Canada's currency is seen weakening over the next six months before firming to the one-for-one mark with the U.S. dollar, a Reuters poll showed on Tuesday, helped by the prospect of central bank easing abroad even as the Bank of Canada looks to tighten. Canadian bond prices edged up across the curve. Canada's two-year government bond rose 3 Canadian cents to yield 1.033 percent, while the benchmark 10-year bond added 26 Canadian cents to yield 1.713 percent.
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