CANADA FX DEBT-C$ rises on German GDP, braces for U.S. data
*C$ higher at 96.01 U.S. cents
*Bond prices up across curve
By Claire Sibonney
TORONTO, Aug 13 (Reuters) - The Canadian dollar climbed against its U.S. counterpart on Friday as global risk appetite improved overnight on stellar German growth data, but concerns about weaker economies in the euro zone and worries over a downside surprise for U.S. inflation figures limited gains.
The euro initially rallied in relief when data showed Germany's economy grew much more than expected in the second quarter, and the Canadian dollar CAD=D4 followed suit, strengthening to as much as C$1.0358 against the greenback, or 96.54 U.S. cents.
But the euphoria soon fizzled out, weighing on riskier assets and currencies, and the Canadian dollar lost steam, turning to trade near flat against Thursday's close.
"I think a lot of the movement in the Canadian dollar has come on the back of the movement in the euro," said Camilla Sutton, senior currency strategist at Scotia Capital.
"Initially we had very strong European growth numbers but then the combination of a weak Italian bond auction, some focus on internal disputes among EU members, as well as the overhang from the Irish banks from earlier this week have all kind of pressured the euro back down ... I think that's weighed on the Canadian dollar."
Investors were closely eyeing crucial U.S. data on July inflation and retail sales, due at 8:30 a.m. (1230 GMT), for the first readings of consumer spending in the third quarter.
"The inflation print will probably be more important if it's a downside surprise because it will aggravate fears over disinflation or even deflation," said Sutton.
"Retail sales will give us another input in terms of how the U.S. consumer is faring so that will be important for the general growth outlook."
An August consumer sentiment survey by Thomson Reuters/University of Michigan is also due.
At 7:54 a.m. (1154 GMT), the Canadian dollar CAD=D4 stood at C$1.0416 to the U.S. dollar, or 96.01 U.S. cents, up slightly from Thursday's finish at C$1.0428 to the U.S. dollar, or 95.90 U.S. cents.
Sutton expected the day's trading range to be between C$1.0350 and C$1.0486. "I suspect we're probably positioning for a weaker Canadian dollar day," she added.
Canadian bond prices were higher across the curve, tracking U.S. Treasuries up, with investors favoring safe-haven government debt ahead of the U.S. inflation data that is likely to confirm the economic recovery is losing steam.
The two-year bond CA2YT=RR inched up 1 Canadian cent to yield 1.354 percent, while the 10-year bond CA10YT=RR gained 15 Canadian cents to yield 2.995 percent. (Reporting by Claire Sibonney, Editing by Chizu Nomiyama)
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