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Market News Canadian dollar retreats from 9-month high on falling retail sales

The Canadian dollar weakened against its U.S. counterpart on Friday, pulling back from a near nine-month high hit earlier in the day, as domestic data showed a surprise decline in May retail sales and the greenback broadly climbed.

The value of Canadian retail trade dipped by 0.1 per cent versus an estimated 0.3 per cent increase, as unusually bad weather hit sales of food, drink and clothing.

“The report casts some doubt on the resiliency of the consumer sector to the ongoing parade of worrisome geopolitical and trade developments,” Ryan Brecht, a senior economist at Action Economics, said in a research note.

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Canada’s economy has showed signs of picking up in the second quarter after a slowdown at the turn of the year, even as a more uncertain outlook for trade has weighed on the global economy.

The U.S. dollar rose against a basket of currencies as fears of a larger-than-expected 50-basis-point interest rate cut in July abated after the New York Federal Reserve downplayed dovish comments from its president on Thursday.

“There has been a generalized rebound in the dollar and Canada has been affected by that, too,” said Alvise Marino, a foreign exchange strategist at Credit Suisse in New York.

At 4:10 p.m., the Canadian dollar was trading 0.3 per cent lower at 1.3060 to the greenback, or 76.57 U.S. cents. The currency’s weakest level of the session was 1.3110, while it touched its strongest since Oct. 25, at 1.3016.

For the week, the loonie was down 0.2 per cent.

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 settled 0.6 per cent higher at $55.63 a barrel on rising tensions between the United States and Iran.

Still, speculators have raised bullish bets on the currency to the highest since March 2018, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed. As of July 16, net long positions in the loonie rose to 20,964 contracts from 9,226 contracts in the prior week.

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Canadian government bond prices dipped across much of the yield curve, with the 10-year falling 2 cents to yield 1.502 per cent.

The 10-year yield touched its lowest intraday level since July 5 at 1.485 per cent, while the gap between Canada’s 2-year yield and its U.S. equivalent widened by 3.9 basis points to a spread of 36.2 basis points in favour of the U.S. bond.

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