TORONTO (Reuters) - The Canadian dollar weakened to a 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 to a session low of C$1.0712.
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.
“Certainly this report implies downward pressure in Canada, so I think today’s data will temper some of the enthusiasm we have recently been seeing for the Canadian dollar, as it suggests the Bank of Canada is likely going to remain on the sidelines,” said Paul Ferley, assistant chief economist at Royal Bank of Canada in Toronto.
The Canadian dollar was at C$1.0708 to the greenback, or 93.39 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 stronger-than-expected domestic inflation, stronger oil prices and short covering.
But that momentum has faded in recent sessions ahead of the Bank of Canada meeting on July 16. Investors are watching to see whether the central bank will alter its message on inflation, though analysts expect the still-lackluster economic growth will allow the Bank of Canada to stay cautious.
That could weigh on the Canadian dollar in coming sessions.
“Right now, I think this is the direction that we’ll continue to move, just as the Bank of Canada will be more dovish than some people think next week,” said David Tulk, chief Canada macro strategist at TD Securities in Toronto.
Canadian government bond prices were higher across the maturity curve, with the two-year up 2-1/2 Canadian cents to yield 1.109 percent and the benchmark 10-year up 25 Canadian cents to yield 2.213 percent.
Additional reporting by Euan Rocha and Solarina Ho; Editing by Meredith Mazzilli