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* C$ ends at C$1.0752 to greenback, or 93.01 U.S. cents
* Inflation data forces market rethink on rates
* Bond yields spike (Adds economist comments, primary dealers poll, updates prices)
By Alastair Sharp
TORONTO, June 20 (Reuters) - The Canadian dollar firmed to its strongest level since the first week of 2014 on Friday after surprisingly high Canadian inflation data and robust retail sales figures challenged the central bank's accommodative policy stance.
In a Reuters poll of primary dealers taken after the release of the data, the dealers forecast that the Bank of Canada's interest-rate trajectory likely wouldn't change, and that it still would not raise rates until the third quarter of next year, but that it would likely have to stop fretting about low inflation.
The Bank of Canada warned investors just last week that low inflation is a lingering concern, signaling to markets its reluctance to raise rates. But the twin data points jolted the currency more than half a cent stronger as it forced traders to rethink the rate outlook.
"Expectations of rate cuts have been pretty much eliminated here in Canada," said Paul Ferley, assistant chief economist at Royal Bank of Canada. "We will start seeing some speculation about whether rate hikes will start to come sooner rather than later."
The currency ended the session at C$1.0752 to the U.S. dollar, or 93.01 U.S. cents, its firmest level since Jan. 7. It closed on Thursday at C$1.0823, or 92.40 U.S cents.
Economists and strategists broadly agree the central bank wants a weaker currency in the hope it will spur exports.
Most say the bank's governor, Stephen Poloz, would be loathe to see the loonie head back towards parity with the greenback, where it had hovered in late 2012.
The U.S. Federal Reserve said this week interest rates in Canada's largest trade partner will stay low through 2016.
"We think (Poloz) will wait until after the Fed before raising the key rate, because he does not want the Canadian dollar to jump back near parity," said Mathieu D'Anjou, an economist at Desjardins Securities in Montreal.
Canadian government bond prices slipped, with the two-year down 12 Canadian cents to yield 1.135 percent, its highest since January, and the benchmark 10-year bond shedding 37 Canadian cents to yield 2.303 percent.
Costlier energy pushed annual inflation to a 27-month high of 2.3 percent in May, while core inflation also defied the Bank of Canada's low-inflation forecasts.
Retail sales data in April also boosted the currency, with auto sales leading the figure to its strongest gain in 11 months and pointing to a likely bounce in gross domestic product for the month. (Editing by Peter Galloway)