Loonie little changed ahead of jobs data, European Central Bank cuts rates

TORONTO – The Canadian dollar was little changed Thursday morning as the European Central bank moved to spark a tepid economic recovery in the eurozone and traders looked ahead to the release of employment data.

The loonie was down 0.02 of a cent to 91.4 cents US as the ECB announced that it was cutting its lending rate to 0.15 per cent from 0.25 per cent.

And in a more drastic step, it is cutting its overnight deposit rate to minus 0.1 per cent from zero. Charging banks for parking funds with the ECB is an unusual step aimed at pushing banks to lend that money rather than hoard it.

Traders looked to a news conference later in the morning by ECB president Mario Draghi for further stimulus details.

Investors had been counting on the ECB to take action to save the eurozone region from falling into a deflationary spiral that would choke off growth. Worries about deflation increased earlier this week with the release of data showing that inflation in the eurozone came in at 0.5 per cent in May, down from 0.7 per cent in April.

The latest data also showed that gross domestic product in the eurozone grew by a paltry 0.2 per cent in the first quarter.

Traders also looked ahead to the other major economic event of the week: the release Friday of the U.S. government’s employment report for May. Economists have forecast that about 219,000 jobs were created during May following a much stronger than expected 288,000 gain in April.

Doubts about reaching that figure were raised Wednesday after payroll firm ADP reported that the U.S. private sector created 179,000 jobs during May, the fewest number in four months.

Canadian job figures for May also come out Friday and economists expect about 21,000 jobs were created after the economy shed 29,000 the previous month.

Prices were generally lower on commodity markets with June crude in New York down 39 cents to US$102.25 a barrel.

July copper was off one cent at US$3.08 a pound while August bullion declined a dime to US$1,244.20 an ounce.