CANADA FX DEBT-Weak Canadian jobs report sends C$ to two-week low

Fri Jul 11, 2014 4:39pm EDT
 
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* Canadian dollar at C$1.0734 or 93.16 U.S. cents
    * Bond prices higher across the maturity curve

 (Adds details, quotes, updates prices)
    By Leah Schnurr
    TORONTO, July 11 (Reuters) - The Canadian dollar weakened to
a more than two-week low against the greenback on Friday after
data showed the country's economy unexpectedly lost jobs last
month, solidifying expectations the central bank will stand pat
next week.
    Canada shed 9,400 jobs in June, frustrating economists'
expectations for a gain of 20,000, while the unemployment rate
ticked up to 7.1 percent. 
    The disappointing figures sent the Canadian dollar through
the C$1.07 level and to a session low of C$1.0737.
    As well as pointing to a pace of jobs growth that has
stalled in Canada, the report also underscored that the Bank of
Canada is likely to maintain its neutral tone when it releases
its monetary policy statement next week.
    "I really feel the Bank of Canada wants to remain in that
neutral-to-dovish stance as long as they possibly can," said Ken
Wills, currency strategist and broker at CanadianForex in
Toronto.
    "Unless there's something really disruptive out there, I
would not expect them to start changing that tone until the
fourth quarter, at the earliest." 
    Recent surprisingly strong inflation data had led investors
to speculate over whether the Bank of Canada's Governor Stephen
Poloz would be forced to alter the central bank's cautious
stance. 
    "The market is likely anticipating it's a sign of relief for
Poloz," said Wills.
    The Canadian dollar ended the North American
session at C$1.0734 to the greenback, or 93.16 U.S. cents,
weaker than Thursday's close of C$1.0647, or 93.92 U.S. cents.
    The loonie touched a six-month high last week, the
culmination of a month-long rally spurred by robust inflation,
stronger oil prices and short covering.
    But that momentum has faded in recent sessions as the short
positions have been unwound and as investors look ahead to more
fundamental catalysts.  
    "I feel we're likely going to be gravitating back toward
C$1.10," said Wills.
    "I wouldn't be surprised if Monday morning we're up
challenging the C$1.0757, which is our next level of resistance
for the pair."
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 3 Canadian cents
to yield 1.106 percent and the benchmark 10-year up
22 Canadian cents to yield 2.217 percent.

 (Editing by Chris Reese)