TORONTO – The Canadian dollar closed slightly lower Monday as traders look ahead to the Bank of Canada’s next scheduled interest rate announcement on Wednesday.
Crude oil at a two-month low also helped push the loonie down 0.06 of a cent to 97.3 cents US.
No one expects Canada’s central bank to change its key rate from one per cent because of persistently weak economic conditions, but it could make subtle changes to its statement about its interest rate intentions.
The tepid pace of the economy was highlighted Friday when data showed fourth quarter growth came in at an annualized rate of 0.6 per cent, with growth actually contracting during December.
“Although Friday’s Q4 GDP release came in line with expectations… it was also below the Bank of Canada’s forecast from the January Monetary Policy Report,” said Scotia Capital currency strategist Eric Theoret.
“As such, there is the risk of a further moderation in the BoC’s hawkish bias.”
At its last meeting in late January, the bank lowered its economic estimates.
That was enough to push the loonie below parity with the greenback, where it has stayed ever since, falling to an eight-month low. And economists don’t expect it to rise above parity any time soon.
Disappointing Chinese data helped commodity prices remain weak after losing ground on Friday.
Expansion in China’s services sector slowed last month to its lowest level since September. The non-manufacturing Purchasing Managers’ Index fell to 54.5 in February from 56.2 in January.
Buying sentiment was also depressed Monday by a move by the Chinese government to cool surging housing prices. The government said it will raise required minimum down payments in areas where prices are deemed to be rising too fast and crack down on efforts to evade limits on how many properties each buyer can acquire.
Any move to tighten China’s economy is usually taken as a negative because the world’s second biggest economy has played a huge role in helping the overall global economy recover from the 2008 financial collapse and subsequent recession.
The April crude contract on the New York Mercantile Exchange fell 56 cents to US$90.12 a barrel, its lowest close since Dec. 24, 2012.
May copper was unchanged at US$3.50 a pound while April bullion inched up a dime to US$1,572.40 an ounce.
There is plenty of major economic data coming down this week that would weigh on the Canadian dollar.
On Friday, Statistics Canada releases the February jobs report.
Economists anticipate job creation for February to come in at 8,000 after a plunge of 22,000 positions during January, with the jobless rate edging up 0.1 of a point to 7.1 per cent.
The U.S. government’s employment report for February also comes out Friday. It is expected that the economy cranked out 155,000 jobs, roughly the same amount as January.