Canadian $ softens on lower oil prices, weak data

The Canadian dollar was weaker against its US counterpart on Monday in light trading, pressured by lower oil prices and as investors looked ahead to domestic data later this week. US data showed consumer spending rose negligibly in February, the latest sign that the US economy has been experiencing a soft first quarter, pinched by the strong greenback and bad weather, among other factors. Meanwhile, inflation edged higher, but was still below target.
"We still expect it to be a bit on the soft side through the first half of this year," said Mazen Issa, macro strategist at TD Securities.
"Once we get that break higher ... that will give the Fed more confidence to begin lifting the policy rate."
In Canada, data showed producer prices rose 1.8 percent in February from January, the first increase in six months, helped by higher prices for energy and petroleum products.
The price of crude, a major Canadian export, dropped as several world powers discussed a possible deal with Iran over its nuclear program. A deal could bring an end to sanctions and see an increase in Iranian oil exports that would add to an already well-supplied oil market.
At 9:30 am (1330 GMT), the Canadian dollar was trading at C$1.2649 to the greenback, or 79.06 US cents, weaker than Friday's close of C$1.26, or 79.37 US cents.
Some market participants have also taken time off ahead of a shortened work week due to the Good Friday statutory holiday. Issa said to expect slightly more volatility due to thin liquidity. Canadian equity markets will be closed on Friday.
Investors are expecting poor economic growth numbers in Canada for January due on Tuesday as well as weak trade figures for February due on Thursday. Markets will also be taking note of US employment data on Friday.
"A lot of (the GDP) weakness is somewhat priced into the currency," said Issa, but said the numbers could be even weaker than expected, which could push the Canadian dollar to weaken further.
Canadian government bond prices were higher across the maturity curve, with the two-year up 1.5 Canadian cents to yield 0.514 percent and the benchmark 10-year edging 2 Canadian cents higher to yield 1.374 percent.