July 19, 2019 / 2:27 PM / a month ago

CANADA FX DEBT-C$ hits 9-day low on surprise decline in retail sales

    * Canadian dollar falls 0.2% against the greenback
    * Canadian retail sales fall 0.1% in May
    * U.S. oil futures increase by 0.5%
    * Canada-U.S. 2-year spread widens by 2.7 basis points

    By Levent Uslu
    TORONTO, July 19 (Reuters) - The Canadian dollar fell to a
nine-day low against its broadly stronger U.S. counterpart on
Friday as domestic data showing a surprise decline in May retail
sales raised bets that the Bank of Canada would cut interest
rates this year.
     The value of Canadian retail trade dipped by 0.1% versus an
estimated 0.3% increase, the first decline in four months, as
bad weather hit sales of food and drink, Statistics Canada data
indicated.             
    Chances of a Bank of Canada interest rate cut by December
climbed to 57% from about 50% before the data, the overnight
index swaps market indicated.           
     At 9:53 a.m. (1353 GMT), the Canadian dollar          was
trading 0.2% lower at 1.3072 to the greenback, or 76.50 U.S.
cents. The currency hit its weakest since July 10 at 1.3110.
    Earlier in the day, the loonie had hit its strongest level
in nearly nine months at 1.3016 but was then pressured by a
rally in the U.S. dollar and the weaker-than-expected domestic
data.
    The U.S. dollar        rebounded against a basket of major
currencies after declining the previous day, as increased bets
for a European Central Bank interest rate cut as early as next
week pressured the euro.              
    The Canadian dollar lost ground on Friday even as the price
of oil, one of Canada's major exports, rose. U.S. crude oil
futures        were up 0.5% at $55.60 a barrel as tensions
spiked again in the Middle East after the United States said it
had destroyed an Iranian drone in the Strait of Hormuz.
            
    Canadian government bond prices were mixed across the yield
curve, with the two-year            up 0.5 Canadian cent to
yield 1.451% and the 10-year             falling 4 Canadian
cents to yield 1.504%.
    The 10-year yield touched its lowest intraday since July 5
at 1.485%, while the gap between Canada's 2-year yield and its
U.S. equivalent widened by 2.7 basis points to a spread of 35.0
basis points in favor of the U.S. bond.

 (Reporting by Levent Uslu; additional reporting by Fergal
Smith; editing by Jonathan Oatis)
  
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