CANADA FX DEBT-C$ steady after data shows a drop in retail sales

* Canadian dollar at C$1.0911 or 91.65 U.S. cents
    * Bond prices lower across the maturity curve

    By Leah Schnurr
    TORONTO, May 22 (Reuters) - The Canadian dollar was little
changed against the greenback on Thursday as it clung to a
narrow trading range despite data that showed a drop in retail
sales in March.
    The loonie has largely traded sideways so far in May, and
analysts expect it to stay comfortable around either side of
C$1.10 as the market weighs Canadian economic data that has
generally been modestly improving against the Bank of Canada's
neutral policy stance.
    Canadian retail sales slipped 0.1 percent in March, falling
short of expectations for a 0.3 percent gain, though February's
figures were revised higher. 
    The loonie weakened briefly after the data was released,
before trading nearly flat. After the retail sales figures,
focus turned to Friday's consumer price index report, which
could spur more currency reaction.
    "It looks like U.S. dollar-Canadian dollar is trying to move
a little bit higher but we need that catalyst, and that catalyst
could come from the CPI report," said Mazen Issa, senior Canada
macro strategist at TD Securities in Toronto.
    "It has become the top data point that is traded, at least
within Canada, given there's so much emphasis from the Bank of
Canada on the low inflation backdrop."
    The Canadian dollar was at C$1.0911 to the
greenback, or 91.65 U.S. cents, little changed from Wednesday's
close of C$1.0915, or 91.62 U.S. cents. The currency traded as
low as C$1.0932 immediately after the retail data was released.
    The retail report offset data that showed contraction in
China's manufacturing sector had slowed to its weakest pace this
year. The Canadian dollar is often sensitive to economic news
from China, which is a major consumer of natural resources.
    For the currency pairing to move significantly from current
levels, the catalyst will likely need to come from a stronger
U.S. dollar as the economic recovery south of the border gains
speed and the Federal Reserve continues to wind down its
accommodative monetary policy, Issa said.
    "At the end of the day, for the U.S. dollar-Canadian dollar
to move higher, it's really going to have to come from the U.S.
leg of the pair," he said.
    "That soft narrative backdrop for Canada has pretty much
been well advanced at this point, so you need to have that U.S.
story really kick in."
    Canadian government bond prices were lower across the
maturity curve, with the two-year off half a Canadian
cent to yield 1.052 percent and the benchmark 10-year
 down 6 Canadian cents to yield 2.311 percent.

 (Editing by Peter Galloway)