Loonie down ahead of BoC rate announcement
TORONTO - The Canadian dollar was lower Wednesday as traders awaited the mid-morning announcement from the Bank of Canada on interest rates.
The loonie dropped 0.2 of a cent to 91.46 cents US as traders also looked to data showing Canada's trade balance slipped into deficit territory during April.
Statistics Canada said that Canada's merchandise exports declined 1.8 per cent while imports increased 1.4 per cent, taking Canada's trade balance with the world from a surplus of $766 million in March to a deficit of $638 million.
Meanwhile, the central bank is expected to leave its key rate at one per cent, where it has been since September 2010 while indicating any hike is far down the road.
"We expect a neutral tone with emphasis on rates on hold for an extended period," said Camilla Sutton, Chief FX Strategist, Managing Director Scotiabank Global Banking and Markets.
Traders also looked ahead to the announcement of stimulus measures to help the eurozone recovery and the release of American and Canadian employment numbers coming out at the end of the week.
Markets are counting on European Central Bank president Mario Draghi to announce measures Thursday aimed at giving a lift to the eurozone's weak recovery and saving the region from falling into a deflationary spiral that would choke off growth. Worries about deflation increased Tuesday in the wake of data showing that inflation in the eurozone came in at 0.5 per cent in May, down from 0.7 per cent in April. The latest data also showed that gross domestic product in the eurozone grew by a paltry 0.2 per cent in the first quarter.
Analysts are looking at a variety of options for the ECB, including an interest rate cut or a form of quantitative easing.
Traders are looking for a strong reading from the U.S. non-farm payrolls report coming down Friday morning, with economists forecasting that about 219,000 jobs were created during May following a much stronger expected 288,000 gain in April.
Ahead of that report, payroll firm ADP reported Wednesday that the U.S. private sector created 179,000 jobs last month.
Canadian job figures for May also come out Friday and economists expect about 21,000 jobs were created after the economy shed 29,000 the previous month.
On the commodity markets, the July crude contract on the New York Mercantile Exchange gained 64 cents to US$103.30 a barrel.
August bullion climbed $3.30 to US$1,247.80 an ounce and July copper fell five cents to US$3.09 a pound.