CANADA FX DEBT-C$ weakens as domestic retail sales data disappoints

(Adds analyst quote, details on CFTC data, updates prices)
    * Canadian dollar ends at C$1.2858, or 77.77 U.S. cent
    * Bond prices mixed across steeper maturity curve

    By Fergal Smith
    TORONTO, Aug 19 (Reuters) - The Canadian dollar weakened
against its broadly firmer U.S. counterpart on Friday after
domestic retail sales data disappointed, although some losses
were pared as oil prices rose.
    Friday's loss snapped a nearly two-week winning streak for
the loonie, according to Reuters data. It last fell on Aug. 5,
although on Wednesday it closed slightly lower based on the Bank
of Canada's official close.
    "If anything, you might have expected a larger slump in the
Canadian dollar, and perhaps that's what we will see on Monday,"
said Adam Button, currency analyst at ForexLive.
    Canadian retail sales unexpectedly fell 0.1 percent in June
on weaker sales of food and alcohol, while fewer consumers
shopped at general merchandise stores.    
    "It just suggests that maybe the Canadian consumer is
growing a bit tired of carrying the burden of growth," said
David Watt, chief economist at HSBC Canada.
    Still, the Bank of Canada is unlikely to react until it sees
more data for the third quarter, Watt said.
    The implied probability of an interest rate cut this year
from the central bank edged up to 23 percent from 20 percent
before the data, overnight index swaps data showed.  
    In a separate report, Canada's annual inflation rate cooled
as expected in July to 1.3 percent from June's 1.5 percent rate,
pulled down by cheaper gasoline prices.
    The Canadian dollar ended at C$1.2858 to the
greenback, or 77.77 U.S. cents, much weaker than Thursday's
close of C$1.2771, or 78.30 U.S. cents.
    The currency's strongest level of the session was C$1.2774,
while its weakest was C$1.2892.    
    On Thursday, the loonie touched its highest in nearly
eight-weeks at C$1.2765.
    U.S. crude prices settled up 30 cents at $48.52 a
barrel, supported by speculation that some major oil producers
will agree to freeze output.    
    Speculators reduced bullish bets on the loonie for a third
straight week, Commodity Futures Trading Commission data showed.
Net long Canadian dollar positions fell to 12,473 contracts in
the week ended Aug. 16 from 15,366 contracts in the prior week
    Canadian government bond prices were mixed across the
maturity curve, with the two-year price flat to yield
0.573 percent and the benchmark 10-year falling 35
Canadian cents to yield 1.078 percent.
    The curve steepened as the spread between the 2-year and
10-year yields widened by 3.7 basis points to 50.5 basis points.
    On Thursday, the spread hit its narrowest since June 2008 at
46.8 basis points.

 (Reporting by Fergal Smith; Editing by Bernadette Baum and
Grant McCool)