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The Canadian dollar finished Tuesday’s session on a little changed footing versus the US currency. Activity in the currency was consolidative in nature. Early support for the Canadian unit was linked to supportive economic data but ongoing worries about the health of the US economy worked against the currency making any significant strengthening move, market watchers said.

The Canadian currency closed out the North American session at 98.23 US cents or C$1.0180 on Tuesday. This compares with Monday’s closing North American mark of 98.22 US cents or C$1.0181.

Statistics Canada Tuesday said Canadian retailers began 2008 on a strong note, as sales increased 1.5% in January to an estimated C$35.8 billion. This was the third consecutive month of strong gains in retail sales. Following moderate sales in mid-2007, retail sales have returned to the rapid growth that began in 2004, the government agency said.

Although retail sales in all sectors were up, five of them posted increases of more than 1.0% in January. Building and outdoor home supplies stores led the way at 3.2%, followed by clothing and accessories stores (+2.9%), furniture, home furnishings and electronics stores (+2.5%), the automotive sector (+1.8%), and general merchandise stores (+1.1%).

Food and beverage stores (+0.9%) also experienced sizeable growth in January. Pharmacies and personal care stores (+0.3%) and miscellaneous retailers (+0.1%) posted fairly stable sales.

On the strength of these increases, total retail sales, excluding sales by dealers of new, used and recreational vehicles and auto parts, rose 1.3% in January, the second strongest increase in eight months, Statistics Canada said.

When price changes are taken into account, retail sales in constant dollars rose 1.0% in January.

The strength in the Canadian dollar derived from the report was short lived as investors took profits and began refocusing on the poor health of the US economy, brokers said. Most of those concerns center over US demand for Canadian products.

Strength in global gold values were seen as supportive for the Canadian unit, but the weakness in crude oil values were an offsetting feature, analysts said.

The next piece of economic data Canadian investors will zero in on will be Monday’s gross domestic report.

Canadian bonds finished Tuesday’s session on a firmer note as weak US economic data and continued nervousness over the financial sector generated support, market watchers said.

The bond market overcame an early indecisive tone to climb into positive territory Tuesday, after early data releases from both Canada and the U.S. had mixed implications, brokers said.

Canada’s January retail sales report was stronger than expected with a 1.5% gain, but U.S. home price data and consumer confidence readings for January and March, respectively, were weak, enabling a positive trend for bonds to eventually assert itself.

The feeble data from the US played into an overall sense that a weakening North American economy and an enduring credit crunch that has yet to run its course are likely to sustain the safe-haven allure of government bonds, analysts said.

source:Trading market