Bond curve inches lower as markets await Friday jobs report and next week’s rate decision
Investors in Canadian fixed income and currency markets are effectively pricing the Bank of Canada on the sidelines, with modest moves in the loonie and bond yields underscoring a wait for fresh labour data and next week’s rate decision.
The Canadian dollar strengthened only slightly on Tuesday as markets focused on domestic jobs numbers due at the end of the week, which could reinforce expectations that the Bank of Canada will hold fire.
Reuters reported the loonie traded 0.1 percent higher at 1.3984 per US dollar, or 71.51 US cents, after moving in a range of 1.3976 to 1.4014.
Tony Valente, senior FX dealer at AscendantFX, told Reuters that traders are “largely in wait-and-see mode ahead of Friday’s Canadian employment report and next week’s Bank of Canada meeting.”
Valente said, “Markets appear comfortable holding steady for now, as the BoC is unlikely to cut rates unless Friday’s jobs data comes in significantly weaker than expected.”
Economists have forecast that Canada’s economy shed 5,000 jobs in November and that the unemployment rate edged up to 7 percent from 6.9 percent in October.
Still, that would follow two months of large job gains, a backdrop that has helped shape expectations for policy.
The Bank of Canada has signalled that its easing campaign is on hold after the benchmark interest rate was lowered to a three-year low of 2.25 percent in October, and investors expect no change in rates at a policy decision next week.
In commodities, the price of oil, one of Canada’s major exports, was trading 0.5 percent lower at US$58.92 a barrel as traders weighed risks from Ukrainian drone strikes on Russian energy sites and concerns about oversupply.
Canadian bond yields edged lower across the curve.
The 10-year was down half a basis point at 3.249 percent, after touching its highest level since September 5 at 3.277 percent.
