CANADA FX DEBT-C$ flat as inflation offsets retail sales data

Fri Aug 22, 2014 9:28am EDT

* Canadian dollar at C$1.0945 or 91.37 U.S. cents
    * Bond prices higher across the maturity curve

    By Leah Schnurr
    TORONTO, Aug 22 (Reuters) - The Canadian dollar was flat
against the greenback on Friday as a surprisingly strong
domestic retail sales report was tempered by separate data that
showed a softer-than-expected annual inflation rate.
    While the two reports were the main domestic event following
a dearth of economic data this week, investors were also turning
their attention to a speech from Federal Reserve Chair Janet
Yellen expected later in the morning.
    Canada's annual inflation rate slipped to 2.1 percent in
July, while retail sales rose 1.1 percent in June, making for
the sixth straight month of gains. 
    Even with the decline, the inflation rate remained above the
Bank of Canada's 2 percent target. With the central bank
concerned about the downside risks to inflation, the report is
closely watched by investors trying to glean the future path of
monetary policy.
    The loonie hit a session low at C$1.0982 immediately
following the pair of reports but was able to claw back those
losses. 
    "It'll be interesting to see which one prevails, I'd lean
toward the retail sales numbers," said Paul Ferley, assistant
chief economist at Royal Bank of Canada in Toronto.
    "Despite the disappointment in inflation, it still remains
pretty close to the Bank of Canada's mid-range target, whereas
the growth numbers are pointing to a recovery from the weakness
at the start of the year."
    The Canadian dollar was at C$1.0945 to the
greenback, or 91.37 U.S. cents, unchanged from Thursday's close.
    The currency pairing could see some choppiness as markets
were positioning ahead of the speech from Yellen, due at 10:00
am EDT (1400 GMT). The Fed chair will be speaking on labor
markets at the annual gathering of policymakers and economists
in Jackson Hole, Wyoming.
    Canadian government bond prices were higher across the
maturity curve, with the two-year edging up 0.2
Canadian cents to yield 1.088 percent and the benchmark 10-year
 up 10 Canadian cents to yield 2.074 percent.

 (Reporting by Leah Schnurr; Editing by Meredith Mazzilli)
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