CANADA FX DEBT-C$ pulls back after disappointing monthly GDP

Mon Jun 30, 2014 9:34am EDT

* Canadian dollar at C$1.0687 or 93.57 U.S. cents
    * Bond prices higher across the maturity curve

    By Leah Schnurr
    TORONTO, June 30 (Reuters) - The Canadian dollar weakened
against the greenback on Monday, pulling back from last week's
near six-month high as data showed the domestic economy grew at
a slower pace than expected in April.
    Still, the loonie was on track to rack up its best month
since September following a rally that was partly fueled by
surprisingly strong inflation figures that prompted markets to
speculate whether the Bank of Canada will have to change its
monetary stance.
    Data on Monday showed economic growth came in at 0.1 percent
in April, below expectations for 0.2 percent, as oil and gas
production fell. The Canadian dollar fell to a session low
shortly after the report. 
    "It reconfirms the moderating growth rate in Canada," said  
  Scott Smith, senior market analyst at Cambridge Mercantile
Group in Calgary.
    While Canadian growth in the first quarter of the year was
disappointingly slow, it still held up better than growth in the
United States, where the economy contracted.
    "With the weakness in the first quarter from the U.S., we'll
probably see a bit of flow through, so our second quarter will
be a little more moderate and we'll probably see the U.S.
outperform Canada on an overall basis in the second quarter,"
said Smith.
    Weaker oil prices were also hurting the loonie as worries
about a disruption to oil output in Iraq faded, said Smith.
    The Canadian dollar was at C$1.0687 to the
greenback, or 93.57 U.S. cents, weaker than Friday's close of
C$1.0661, or 93.80 U.S. cents.
    The C$1.07 level should act as a floor for the loonie for
the session, though it could weaken beyond that if U.S. data
later in the morning comes in surprisingly strong, said Smith.
    On the last trading day of June, the loonie was up 1.5
percent. For the quarter, the currency has fared even better, up
3.4 percent and matching the gain seen in the third quarter of
last year.
    Trading could be lighter than usual on Monday heading into
Tuesday's Canada Day market holiday.
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 2-1/2 Canadian
cents to yield 1.107 percent and the benchmark 10-year
 was up 7 Canadian cents to yield 2.244 percent.












 (Editing by Meredith Mazzilli)
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