CANADA FX DEBT-C$ up, bonds mixed ahead of GDP data, BoC eyed
* C$ edges up to C$0.9754 to the U.S. dollar, or $1.0252
* Bond prices mixed
* GDP, Bank of Canada are key events this week
TORONTO, May 30 (Reuters) - The Canadian dollar was moderately firmer against the U.S. currency on Monday ahead of data that will show how the economy fared in the first quarter.
Canadian bond prices were mixed, with Canada's short end on the rise ahead of the data and the Bank of Canada's rate decision on Tuesday.
The economy is expected to have bounced back in March after it contracted in February for the first time since last September, rounding off a strong first quarter overall.
If forecasts are accurate, annualized quarterly growth, forecast to grow 4 percent, would be the strongest since the 5.5 percent rate in the first quarter of 2010. For more see [ID:nN27256435].
However, the currency's reaction to the data may be more muted than usual, given the Bank of Canada rate decision on Tuesday.
The central bank is widely expected to keep its key rate steady at 1 percent. [ID:nN27269933]
"It's not like the central bank is poised to move, and it's not waiting for one piece of information to decide one way or the other," said Paul Ferley, assistant chief economist at Royal Bank of Canada.
"But it could shape how they characterize the economy."
A Reuters survey of economists and global strategists last week expected the Bank of Canada will raise interest rates some time in the third quarter, with forecasters split between whether there will be one or two 25-basis-point increases in the period. [ID:nN26157496] [CA/POLL]
Swaps traders have priced in a reduced likelihood of rate hikes for the remainder of 2011. BOCWATCH
RBC was among several Canadian primary dealers this month to have pushed back their rate-hike forecasts from July to September, citing the Bank of Canada's recent concern about developments abroad, such as the euro zone debt crisis.
"Our sense is the bank will just take the opportunity to monitor the situation, holding interest rates unchanged," said Ferley, adding that external and domestic data will likely be strong enough by September to warrant a return to tightening policy.
At 8 a.m. (1200 GMT), the Canadian currency CAD=D4 was at C$0.9754 to the U.S. dollar, or $1.0252, up from Friday's North American session close at C$0.9773 or $1.0232.
Canada's rate-sensitive two-year bond CA2YT=RR was up 4 Canadian cents to yield 1.507 percent, while the 10-year bond CA10YT=RR slipped 16 Canadian cents to yield 3.063 percent.
Activity was also thinner than usual due to the Memorial Day holiday that will keep U.S. markets closed on Monday. (Reporting by Ka Yan Ng; Editing by James Dalgleish)
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