CANADA FX DEBT-C$ firms with oil ahead of Bank of Canada rate decision

* Canadian dollar at C$1.3123, or 76.20 U.S. cents
    * Bond prices mixed across the maturity curve

    TORONTO, May 25 (Reuters) - The Canadian dollar edged higher
against its U.S. counterpart on Wednesday as oil prices and
stocks rose, while the market braced for an impending interest
rate announcement by the Bank of Canada.
    Oil rose towards $50 a barrel for the first time in seven
months after industry data showed a sharp fall in U.S.
inventories. U.S. crude prices were up 1.25 percent at
$49.23 a barrel. 
    Adding to support for risk-sensitive commodity-linked
currencies such as the Canadian dollar, stocks climbed as risk
eased that Britain or Greece would leave the European Union,
while German business morale improved more than expected in May.
    At 9:15 a.m. EDT (1315 GMT), the Canadian dollar 
was trading at C$1.3123 to the greenback, or 76.20 U.S. cents,
stronger than Tuesday's official close of C$1.3146, or 76.07
U.S. cents.
    The currency's strongest level of the session was C$1.3087,
while its weakest was C$1.3133.
    Still, the loonie has fallen 5 percent from its 10-month
high of C$1.2461 on May 3, pressured by speculation that the
U.S. Federal Reserve will raise interest rates as early as next
month, as well as a weaker outlook for Canada's economy
following a strong start to 2016.
    Canada's central bank is widely expected to hold interest
rates at 0.50 percent but strike a more dovish tone due partly
to a massive wildfire in Alberta that has disrupted oil
production. The rate decision is due at 10:00 a.m. EDT (1400
    Production cuts in Alberta's oil sands forced by the raging
wildfire may cause Canadian growth to stall in the second
quarter, economists have warned. 
    Overnight index swaps implied just a 6 percent chance of a
rate cut this year, much less than the 40 percent chance implied
two weeks ago.    
    Canadian government bond prices were mixed across the
maturity curve, with the two-year price flat to yield
0.629 percent and the benchmark 10-year falling 1
Canadian cent to yield 1.366 percent.
    The Canada-U.S. two-year bond spread was 0.7 of a basis
point more negative at -30.3 basis points, its largest gap since
March 28, while the 30-year spread was 1.3 basis points more
negative at -50.7 basis points as Canadian government bonds

 (Reporting by Fergal Smith; Editing by Bernadette Baum)