Canadian dollar edges lower as attention shifts to GDP data

TORONTO (Reuters) - The Canadian dollar weakened slightly against the greenback on Wednesday, pulling back from an earlier five-day high as investors awaited GDP data that could guide expectations for the Bank of Canada’s interest rate outlook.

FILE PHOTO: A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto January 23, 2015. REUTERS/Mark Blinch/File Photo

Canada’s third quarter gross domestic product data is due on Friday. Economists expect the economy has slowed after expanding by 3.7% annualized in the second quarter.

“I think we are in a hiatus move (for the loonie) until we get the GDP data,” said Amo Sahota, director at Klarity FX in San Francisco. “That is going to be the key driver, otherwise I think it is still trading risk-on, risk-off with the U.S.-China trade agreement focus.”

Wall Street’s main indexes closed at record levels for a third straight day in a muted volume session ahead of the Thanksgiving holiday, as fresh data pointed to an economy on solid footing. Investors remained cautiously optimistic about a resolution to trade tensions between the United States and China.

The Bank of Canada, which will make a policy decision next week, has expressed concern about the impact of trade conflicts on Canada’s commodity-linked economy.

The central bank is now expected to leave rates on hold through to the end of next year, according to a slim majority of economists in a Reuters poll.

At 4:27 p.m. (2127 GMT), the Canadian dollar CAD=D4 was trading 0.1% lower at 1.3280 to the greenback, or 75.30 U.S. cents. Earlier in the session, the currency touched its strongest level since Nov. 22 at 1.3261.

The five-day high for the loonie came as operations resumed at Canada's largest railway, Canadian National Railway Co CNR.TO, a day after the company and union officials reached a tentative deal to end an eight-day-long strike that triggered a severe propane shortage and left many Canadian exports stranded.

The price of oil, one of Canada's major exports, fell as an industry report showed a surprise boost in U.S. crude inventories. U.S. crude oil futures CLc1 were down 0.5% at $58.11 a barrel.

Canadian government bond prices were lower across the yield curve in sympathy with U.S. Treasuries after data showed that new orders for key U.S.-made capital goods increased by the most in nine months in October.

The 10-year CA10YT=RR fell 30 Canadian cents to yield 1.474%.

Reporting by Fergal Smith; editing by Jonathan Oatis and Tom Brown