Loonie lower, greenback rises

Photo: Contributed

The Canadian dollar was lower Thursday, giving back all of the strong gain of the previous session on indications the Bank of Canada won't be cutting rates again any time soon.

The loonie was down 0.53 of a U.S. cent to 80.01 cents after the Bank of Canada said it was keeping its key rate unchanged at 0.75 per cent. The central bank had surprised markets with a quarter-point cut in January to counter the knock-on effects of the collapse of oil prices on the economy.

"The bank is in wait-and-see mode, leaving the central bank data dependent," observed Camilla Sutton, chief FX strategist, managing director, Scotiabank Global Banking and Markets.

She said the bank will be keeping a close eye on how oil prices are impacting the broader economy while looking for evidence "of how the non-energy economy is unfolding, making next week's trade and employment releases important."

Sutton also noted that financial stability risks are unfolding, which makes housing data particularly important.

The loonie lost ground and the greenback appreciated across the board as European Central Bank head Mario Draghi said the ECB would start on Monday its 1.1-trillion-euro bond purchase program to stimulate the recovery and raise the rate of inflation from a dangerously low 0.3 per cent. The ECB will buy 60 billion euros ($67 billion) per month in government and corporate bonds starting Monday.

He also said that the bank was raising its growth forecast for this year to 1.5 per cent from 1.0 per cent.

Meanwhile, traders awaited the major U.S. economic event of the week, the release Friday of the government's employment report for February. Economists expect the American economy created about 235,000 jobs last month. Canadian employment data for February will be released March 13.

On the commodity markets, April crude in New York slipped 13 cents to US$51.40 a barrel.

Metals were mixed with May copper unchanged at US$2.66 a pound while April gold gained $2 to US$1,202.90 an ounce.