CANADA FX DEBT-C$ holds steady after inflation, retail sales data

Fri Jan 23, 2015 9:53am EST
 
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* Canadian dollar at C$1.2410 or 80.58 U.S. cents
    * Bond prices mixed across the maturity curve

    By Solarina Ho
    TORONTO, Jan 23 (Reuters) - The Canadian dollar was steady
against the greenback on Friday after data showed a surprise
jump in Canadian retail sales to a record high in November and
an increase in core inflation in December.
    The currency, battered by this week's shock Bank of Canada
rate cut, was higher overnight but then weakened to a 5-1/2 year
low after the figures showed Canada's annual inflation rate in
December dropped to 1.5 percent from 2.0 percent, a nine-month
low.
    But core inflation, which is closely watched by the Bank of
Canada and which strips out the prices of volatile items such as
gasoline, increased to 2.2 percent from 2.1 percent.
    Retail sales for November rose 0.4 percent to a record
C$43.03 billion, helped by sales of new electronics products.
Analysts had, on average, expected a decline of 0.2 percent.
    "Very short term, in terms of markets, the surprise was
larger on the retail side so we see a little bit of a rally in
the Canadian dollar but we're not even close to where we opened
today," said David Tulk, chief Canada macro strategist at TD
Securities.
    "This is close enough to what people were looking for and
more generally, I think everyone's still in shock after the Bank
of Canada move."
    At 9:14 a.m. (1414 GMT), the Canadian dollar was at
C$1.2410 to the greenback, or 80.58 U.S. cents, stronger than it
was just before the data's release, but little changed from
Thursday's close of C$1.2404, or 80.62 U.S. cents.
    The currency was well off the C$1.2360, or 80.91 U.S. cents,
it had strengthened to overnight.
    Reaction to Friday's data was tempered by the Bank of
Canada's 0.25 basis point interest rate cut to 0.75 percent that
blindsided financial markets earlier this week.
    Markets were still absorbing the impact of the move, which
the bank said was "insurance" against the impact of low crude
prices on the economy of Canada, a major oil-producing nation.
    Canadian government bond prices were mixed across the
maturity curve, with the two-year flat, yielding 0.55
percent and the benchmark 10-year climbing 16.6
Canadian cents to yield 1.516 percent.

 (Editing by Peter Galloway)