CANADA FX DEBT-Canadian dollar gives up weekly gain on retail sales miss

    * Loonie weakens 0.3% against the greenback
    * Canadian retail sales decrease by 1.2% in October
    * Loonie is on track to be little changed for the week 
    * Canadian bond prices rise across the yield curve

    By Fergal Smith
    TORONTO, Dec 20 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Friday, giving up this week's
gains after domestic data showing a surprise decline in retail
sales revived bets that the Bank of Canada would cut interest
rates next year.
    Canadian retail sales were down 1.2% in October from
September at C$50.92 billion, on weaker sales at motor vehicle
and parts dealers, as well as building material and garden
equipment supplies dealers, Statistics Canada said. Analysts had
forecast a 0.5% increase.             
    "With the exception of housing markets, Canadian economic
releases in the past few weeks have been unambiguously
negative," Omar Abdelrahman, an economist at TD Economics, said
in a note. "This one is no different. As a result, we are
expecting a continued tepid performance for the Canadian economy
in the fourth quarter."
    Chances of a rate cut over the coming year, which had
dwindled in recent weeks, jumped to nearly 50% from about 25%
before the data, the overnight index swaps market indicated.
          
    Separate data showed that new-home prices fell 0.1% in
November after rising 0.1% in October.             
    At 9:39 a.m. (1439 GMT), the Canadian dollar          was
trading 0.3% lower at 1.3164 to the greenback, or 75.96 U.S.
cents. The currency traded in a range of 1.3123 to 1.3181.
    For the week, the loonie was on track to be little changed.
On Wednesday, it notched a seven-week high at 1.3103, supported
by data showing a pick-up in Canadian underlying inflation and a
trade deal between the United States and China.
    Canada is a major exporter of commodities, including oil, so
its economy could benefit from an improved outlook for global
trade.    
    The price of oil was set on Friday for a third straight
weekly gain after easing U.S.-China trade tensions lifted
business confidence and the outlook for global economic growth.
            
    Canadian government bond prices were higher across the yield
curve, with the two-year            up 6 Canadian cents to yield
1.665% and the 10-year             rising 21 Canadian cents to
yield 1.637%.
    The gap between Canada's 10-year yield and its U.S.
counterpart widened by 4.6 basis points to a spread of 29.3
basis points in favor of the U.S. bond.

 (Reporting by Fergal Smith; Editing by Steve Orlofsky)