Loonie lower ahead of rate announcement
TORONTO - The Canadian dollar was slightly lower Wednesday morning ahead of the announcement from the Bank of Canada on interest rates.
The loonie declined 0.03 of a cent to 92.92 cents US.
The bank is expected to leave its key rate unchanged at one per cent, where it's been for almost four years as the global economy recovers from the severe economic slowdown that followed the 2008 financial collapse.
However, the currency could come under pressure following the announcement with central bank governor Stephen Poloz expected to adopt a more dovish tone on rates amid weakening economic indicators.
"The combination of softer than expected April gross domestic product,, weak employment and a cautious Federal Reserve provide evidence that there is still significant slack in the Canadian economy," said Camilla Sutton, chief FX strategist and managing director Scotiabank Global Banking and Markets.
"And accordingly the risk of inflation rising sustainably above two per cent is limited, allowing the bank to maintain its neutral stance and Governor Poloz his more dovish tone."
Elsewhere on the economic front, there was positive economic news from China overnight.
Data showed that Chinese economic growth rose to 7.5 per cent over a year earlier in the three months ended June 30 from the previous quarter’s 7.4 per cent.
The report was in line with the ruling Communist Party's 7.5 per cent target for the year, higher than expectations for a 7.4 per cent advance. Analysts say Chinese leaders are willing to accept even slower growth so long as the economy generates enough new jobs to prevent unrest.
"Today's numbers should further allay fears of a sharp near-term downshift in the economy's performance," said Peter Buchanan, senior economist at CIBC World Markets.
"We continue to look for GDP growth this year to come in at or slightly above the current official 7.5 per cent target."
On the commodities market, August crude gained 82 cents to US$100.80 a barrel.
August bullion edged up 70 cents to US$1,297.80 an ounce while September copper was unchanged at Us$3.25 a pound.