CANADA FX DEBT-C$ firms after Canada GDP; awaits Bernanke, ECB
* C$ firms to $0.9873 vs. US$, or $1.0129 * Bond prices fall across the curve * Canada GDP in second quarter beats forecasts * Markets await Bernanke at 10:00 a.m. ET By Solarina Ho TORONTO, Aug 31 (Reuters) - The Canadian dollar climbed against the U.S. dollar on Friday in the wake of data showing the country's economy grew at a quicker pace than expected and against a backdrop of positive news out of Europe. Canada's GDP grew at an annualized 1.8 percent in the second quarter, exceeding analyst estimates, as strong business investment offset a small fiscal drag, Statistics Canada said. "It's slightly better than expected so it might give the currency a bit of a boost, especially given the fact that underlying financial markets are relatively firm this morning, but I don't think the GDP report is going to make a lasting impact on the currency," said Doug Porter, deputy chief economist with BMO Capital Markets. Market participants were also looking ahead to impending remarks by U.S. Federal Reserve Chairman Ben Bernanke. "I suspect what Bernanke says today and what we hear from the ECB next week will be more important," said Porter. Bernanke addresses a symposium of central bankers in Jackson Hole, Wyoming, at 10:00 a.m. ET (1400 GMT), and his remarks may offer clues on the Fed's next policy steps. European Central Bank member, Benoit Coeure, strengthened market expectations that the ECB will intervene to help tackle the region's three-year-old debt crisis by saying ECB bond purchases in the sovereign debt market must be subject to strict conditionality. The comment fueled hopes the central bank will buy Spanish and Italian government bonds to reduce their high borrowing costs. At 9:13 a.m. (1313 GMT), the Canadian dollar stood at C$0.9873, or $1.0129, firmer than Thursday's North American session close at C$0.9923 versus the greenback, or $1.0078. It had touched a session high of C$0.9866, or $1.0136 after the GDP data. Overnight index swaps, which trade based on expectations for the central bank's key policy rate, showed that traders increased bets on a rate hike in 2013 after the data. Riskier assets were largely recovering from modest falls this week ahead of Bernanke's address in Jackson Hole, with few in the market expecting the Fed chief to signal anything major, such as a third round of quantitative easing or bond buying. Canadian bond prices fell across the curve on Friday, with the two-year bond down 4.5 Canadian cents to yield 1.150 percent and the benchmark 10-year bond down 3 Canadian cents to yield 1.774 percent.
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