CANADA FX DEBT-C$ hits a fresh 2-week low on domestic data

* Canadian dollar at C$1.3351, or 74.90 U.S. cents
    * Loonie touches its weakest since Jan. 4 at C$1.3388.
    * Bond prices higher across much of the yield curve

    By Fergal Smith
    TORONTO, Jan 20 (Reuters) - The Canadian dollar weakened to
a fresh 2-week low against its U.S. counterpart on Friday,
pressured by weaker-than-expected domestic inflation and retail
sales data just two days after the Bank of Canada left the door
open to cutting interest rates.
    Canada's annual inflation rate rose to 1.5 percent in
December from November's 1.2 percent, short of analysts'
forecasts for an increase to 1.7 percent, data from Statistics
Canada showed. 
    Retail sales edged up 0.2 percent in November, which was shy
of economists' expectations for an increase of 0.5
    "These numbers are not going to help the (Canadian) dollar,
that's already on its back foot and I don't think it really
changes the (Bank of Canada's) view of things," said Doug
Porter, chief economist at BMO Capital Markets.
    On Wednesday, the Bank of Canada warned that a rate cut
remained on the table, warning there would be "material
consequences" if U.S. President-elect Donald Trump enacts
protectionist policies.
    The U.S. dollar recouped earlier losses ahead of
Trump's inauguration and a speech that could shed some light on
his economic policies.
    At 9:24 a.m. ET (1424 GMT), the Canadian dollar was
trading at C$1.3351 to the greenback, or 74.90 U.S. cents,
weaker than Thursday's close of C$1.3314, or 75.11 U.S. cents.
    The currency's strongest level of the session was C$1.3285,
while it touched its weakest since Jan. 4 at C$1.3388.
    The implied probability of a Bank of Canada interest rate
hike this year fell to 26 percent from 35 percent before the
economic reports, data from the overnight index swaps market
    "I think previous market pricing was too optimistic on the
Bank of Canada, so I think we are moving toward a more realistic
setting," said Andrew Kelvin, senior rates strategist at TD
    Still, he expects the central bank to be comforted by core
inflation measures that are "trending a bit higher" and retail
sales volumes that climbed.
    Canadian government bond prices were higher across much of
the yield curve, with the two-year up 4.5 Canadian
cents to yield 0.767 percent and the 10-year rising
17 Canadian cents to yield 1.741 percent.
    The 10-year yield fell 4.7 basis points further below its
U.S. equivalent to a spread of -74.5 basis points.
    U.S. crude prices were up 2.49 percent at $52.65 a
barrel ahead of a producers' compliance meeting. 
     Oil is one of Canada's major exports.

 (Editing by Bernadette Baum)