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* C$ up at C$0.9766 to the U.S. dollar, or $1.0249
* Bond prices flat to lower
TORONTO, May 27 (Reuters) - The Canadian dollar edged up against the U.S. currency on Friday morning, while bond prices were mildly lower, as markets watchers trained their sights on Tuesday's Bank of Canada rate decision.
The Canadian dollar moved in a holding pattern, remaining comfortably in the same range all week, as market participants have been increasingly guarded about placing new bets ahead of the central bank's next policy announcement date on May 31.
On top of that, the euro zone's worsening debt crisis and worries about the uneven U.S. economic recovery are some of the key risks that have rattled market sentiment.
"The momentum in rates markets towards pushing higher is just very difficult to get in front of at this point with a lot of the risk in the global economy tilted to the downside," said David Tulk, chief Canada macro strategist at TD Securities.
"Those are sufficiently alarming to keep people in the safety of government debt."
Downside risks have also been highlighted by Bank of Canada Governor Mark Carney, who earlier this month gave an influential speech that forced investors to rethink just how much soaring prices for oil and other commodities really help economic growth. [ID:nN26119785]
In response, swaps markets now reflect a lower likelihood that the central bank will raise rates soon. BOCWATCH
A Reuters poll of economists and strategists on Thursday forecast the bank will raise interest rates sometime in the third quarter, with respondents split on whether there will be one or two 25 basis point increases during the quarter.
The bank's key policy rate has remained at 1 percent since September. Very few market participants expect the central bank will resume raising rates on Tuesday, even after a Statistics Canada report that is expected to show stellar first-quarter economic growth in Canada.
"The main event that will offset any hawkishness that comes out of the GDP report will be more than firmly offset by a very neutral Bank of Canada that will reiterate a lot of the same messages that were delivered in the April MPR and then repeated by Mark Carney a couple of weeks back in his speech," said Tulk.
At 8:27 a.m. (1227 GMT), the Canadian dollar CAD=D4 was at C$0.9766 to the U.S. dollar, or $1.0249, up mildly from Thursday's North American session close at C$0.9787 to the U.S. dollar, or $1.0218.
Canada's two-year bond CA2YT=RR was little changed, yielding 1.541 percent, while the 10-year bond CA10YT=RR slipped 12 Canadian cents to yield 3.058 percent.
(Reporting by Ka Yan Ng, Editing by Chizu Nomiyama)