CANADA FX DEBT-C$ little changed, caught in 'tug of war' of data

July 24, 2014 Reuters

July 24, 2014

By Leah Schnurr

The Canadian dollar was little changed against the greenback on Thursday as encouraging global purchasing activity data was offset by robust jobs data south of the border that supported the U.S. dollar to the detriment of the loonie.

In a quiet week for domestic economic data, there were few catalysts to take the currency strongly in either direction and analysts expect the Canadian dollar will continue to tread its recent range.

Data showed China’s factory activity expanded at its fastest in 18 months in July, while the euro zone’s private sector picked up. The reports together suggested the global economy started the second half of the year on solid footing.

But that was tempered by a separate report that showed the number of Americans filing new claims for unemployment benefits fell last week to the lowest since early 2006. That pressured the loonie as it underscored speculation the Federal Reserve could raise interest rates sooner than had been expected.

Fed Chair Janet Yellen said last week that the U.S. central bank could raise rates sooner and more rapidly than currently anticipated if the labor market continued to improve faster than expected by policymakers.

“The loonie is in a bit of a tug of war this morning,” said Scott Smith, senior market analyst at Cambridge Mercantile Group in Calgary.

“We’ve got a couple opposing factors affecting the loonie, which has kept it hemmed right around the unchanged mark for now.”

The Canadian dollar was at C$1.0734 to the greenback, or 93.16 U.S. cents, slightly weaker than Wednesday’s close of C$1.0729, or 93.21 U.S. cents.

While the loonie is nearly flat for the week so far, the currency will see more potential drivers next week with gross domestic product reports on both sides of the border,as well as the U.S. unemployment report and a Federal Reserve meeting.

“We don’t have too many catalysts until next week to try to get a sense of a better view point going forward,” said Smith.

The currency pairing should find support at C$1.07, while the high C$1.07s to C$1.08 area will likely act as resistance unless U.S. economic data continues to come in strong, said Smith.

Canadian government bond prices were lower across the maturity curve, with the two-year down 2.2 Canadian cents to yield 1.094 percent and the benchmark 10-year
down 26 Canadian cents to yield 2.162 percent.


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