CANADA FX DEBT-C$ slips as retail sales disappoint; monetary policy eyed
* Canadian dollar ends at C$1.2546, or 79.71 U.S. cents * Big drop in retail sales boosts odds of rate cut * Central banks in focus next week * Bond prices higher across maturity curve By Alastair Sharp TORONTO, Feb 20 (Reuters) - The Canadian dollar weakened against the U.S. dollar on Friday after disappointing domestic retail sales data, with further slips likely if North American central bankers stick to their divergent interest rate trajectories next week. Bank of Canada Governor Stephen Poloz speaks on Tuesday, while his Federal Reserve counterpart Janet Yellen will give testimony to U.S. lawmakers on Tuesday and Wednesday. Another rate cut in Canada following January's shock move is widely expected to be on its way, while the Fed is eyeing a hike sometime this year. "Relatively hawkish comments from Yellen should be generally U.S. dollar supportive," said Shaun Osborne, chief currency strategist at TD Securities. "The Canadian currency will very likely soften in the event of Poloz sounding somewhat dovish." The Canadian currency slipped to C$1.2546 against the U.S. dollar, or 79.71 U.S. cents, by the close on Friday, well below Thursday's North American session close at C$1.2498 to the greenback, or 80.01 U.S. cents. It lost 0.7 percent of its value over the week. Friday's retreat was aided by a bigger-than-expected 2 percent drop in retail sales in December, the largest decline since April 2010. "The large disappointment in retail sales has increased the expectation that we could see another interest rate cut in Canada, and weighed heavily on the Canadian dollar," said Camilla Sutton, chief currency strategist at Scotiabank. The currency largely ignored a deal reaching in Europe between Greece and its international creditors. "It's another delay and pray, pretend and extend, whatever you want to call it, giving the Greeks a little bit of time to sort themselves out and decide whether they are going to pay everyone back," TD's Osborne said. He said the currency pair would likely trade within a C$1.21-C$1.2650 range unless triggered by clear evidence the Fed was about to raise rates or by renewed weakness in the price of crude oil . A surprise interest rate cut last month and persistent weakness in the price of crude has weighed on Canada's currency as investors worry cheap oil could push domestic inflation into negative territory. Canada is a major oil producer. Canadian government bond prices were higher across the maturity curve, with the two-year rising 5 Canadian cents to yield 0.405 percent. The benchmark 10-year rose 35 Canadian cents to yield 1.434 percent. (Additioanl reporting by Andrea Hopkins; Editing by Meredith Mazzilli and James Dalgleish)
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