CANADA FX DEBT-C$ retreats from a 10-day high against broadly stronger greenback

Fri Jul 15, 2016 4:52pm EDT
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(Adds analyst quote and details on currency's weekly
performance, central bank rate cut expectations and CFTC data,
updates prices)
    * Canadian dollar ends at C$1.2937, or 77.30 U.S. cents
    * Loonie touches its strongest since July 5 at C$1.2861
    * Currency rises 0.8 percent for the week
    * Bond prices lower across the maturity curve

    By Fergal Smith
    TORONTO, July 15 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Friday, retreating from an
earlier 10-day high as firm U.S. data supported the greenback
and domestic manufacturing data disappointed.
    Canadian factory sales fell more than expected in May,
sliding 1.0 percent from April on weakness in motor vehicles and
some energy products. 
    The U.S. dollar rose against a basket of major
currencies after stronger than expected retail sales added to
evidence that growth in the U.S. economy has regained momentum
after a first-quarter lull. 
    Still, the Canadian dollar advanced 0.8 percent for the week
as a somewhat optimistic update on Wednesday from the Bank of
Canada lowered expectations for an interest rate cut.
    The implied probability of a rate cut this year fell to 7
percent, overnight index swaps data showed. It had been above 30
percent in the week following the British referendum vote on
June 23 to leave the European Union. 
    Adding to support for Canada's risk-sensitive currency, the
market has taken in stride the Bank of England's surprise
decision on Thursday not to cut interest rates.
    "If the Bank of England isn't crying about the sky falling
and cutting rates ... then maybe we have gotten ahead of
ourselves a little bit around these Brexit fallout concerns,"
said Brad Schruder, director of corporate sales and structuring
at BMO Capital Markets.
    The Canadian dollar ended at C$1.2937 to the
greenback, or 77.30 U.S. cents, weaker than Thursday's close of
C$1.2898, or 77.43 U.S. cents.
    The currency's weakest level of the session was C$1.2988,
while it touched its strongest since July 5 at C$1.2861.
    U.S. crude oil futures settled up 27 cents at $45.95
a barrel after economic data from top energy consumers the
United States and China boosted the oil demand outlook. 
    Speculators increased bullish bets on the loonie for the
third straight week, Commodity Futures Trading Commission data
showed. Net long Canadian dollar positions rose to 17,175
contracts in the week ended July 12 from 11,517 contracts in the
prior week.
    Canadian government bond prices were lower across the
maturity as safe-haven assets such as U.S. Treasuries retreated.
    The two-year price fell 5.5 Canadian cents to
yield 0.574 percent and the benchmark 10-year 
declined 33 Canadian cents to yield 1.093 percent.
    The 10-year yield has rebounded from a five-month low on
Monday at 0.935 percent.  

 (Editing by Lisa Von Ahn)