CANADA FX DEBT-C$ pares losses after weak retail sales data; bonds rise
* Canadian dollar at C$1.3299 or 75.19 U.S. cents * Bond prices higher across the maturity curve By Fergal Smith TORONTO, Nov 20 (Reuters) - The Canadian dollar was little changed against the U.S. dollar on Friday, but Canada government bonds outperformed after domestic data revealed weaker than anticipated retail sales, but resilience in core inflation. The Canadian dollar weakened on the data as the market appeared to react to the retail sales data. "Anytime you have two numbers like this, I always view retail as being a bit more of a risk, just because it's more volatile in general than the CPI." said Doug Porter, chief economist at BMO Capital Markets. However, the move was short-lived, with the Canadian dollar mostly unwinding earlier losses despite weakness in crude oil prices. At 9:36 a.m. EST (1436 GMT), the Canadian dollar was trading at C$1.3299 to the greenback, or 75.19 U.S. cents, slightly weaker than Thursday's official close of C$1.3297, or 75.20 U.S. cents. Against the euro, the Canadian dollar firmed 0.2 percent to 1.4229 after European Central Bank President Mario Draghi fed expectations for additional policy easing in December. Retail sales unexpectedly fell 0.5 percent in September to C$43.3 billion ($32.5 billion), dragged down by lower fuel prices and slower auto sales, data from Statistics Canada showed on Friday. Analysts had, on average, forecast a 0.2 percent rise. In volume terms, retail sales rose just 0.1 percent. Canada's annual inflation rate held at 1.0 percent in October as lower energy prices moderated higher food prices. The annual core inflation rate, was 2.1 percent, slightly firmer than the 2.0 percent median prediction of analysts. "On the Canadian inflation data, the story continues to be, at least in part, cheap energy prices are depressing the headline rate to 1.0 percent but looking at when exactly gasoline starts really declining, starting next month we will actually have more favorable year-on-year comparisons," said Nick Exarhos, economist at CIBC Capital Markets. Canadian government bond prices were higher across the maturity curve, with the two-year price up 2.5 Canadian cents to yield 0.606 percent and the benchmark 10-year rising 13 Canadian cents to yield 1.608 percent. The Canada-U.S. two-year bond spread was 1.8 basis points wider at -28.7 basis points, while the 10-year spread was 0.7 of a basis point wider at -63 basis points, as Canadian government bonds outperformed on the weaker than expected retail sales data and slippage in crude oil. U.S. crude prices were down 1.04 percent to $40.12, while Brent crude added 0.27 percent to $44.3. (Reporting by Fergal Smith Editing by W Simon)
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