TORONTO, March 22 (Reuters) - The Canadian dollar fell against its broadly stronger U.S. counterpart on Friday, registering a weekly decline, as domestic retail sales data added to evidence of an economic slowdown that could spur interest rate cuts.
The loonie was trading 0.6% lower at 1.3605 to the U.S. dollar, or 73.50 U.S. cents, stopping just short of its weakest level in three months which it posted on Tuesday at 1.3613. For the week, the currency was down 0.5%.
Canadian retail sales fell 0.3% in January from December. Sales volume rose 0.2%, while a preliminary estimate showed them up 0.1% in February.
"This morning's retail sales number was better than expected, but remained consistent with the evaporation in domestic consumer demand that has been sapping the Canadian economy's momentum for months," said Karl Schamotta, chief market strategist at Corpay.
"The Bank of Canada will remain alert to the risk of a repeat of last year's melt-up in housing markets, but otherwise seems destined to begin cutting rates at the June meeting."
Money markets have raised bets on the BoC easing rates in June, seeing a roughly 70% chance, after data on Tuesday showed inflation cooling to an annual rate of 2.8%.
The U.S. dollar (.DXY), opens new tab headed for a second week of gains against a basket of major currencies after a surprise rate cut in Switzerland highlighted the gap in monetary policy between the Federal Reserve and major peers.
"Decisions in the rest of the world this week saw central banks moving in a uniformly-dovish direction, and the Federal Reserve's 'dot plot' bore the imprint of a hawkish tilt in medium- and long-term rate expectations," Schamotta said.
Canadian bond yields moved lower across the curve, tracking U.S. Treasuries. The 10-year was down 7 basis points at 3.447%.
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Reporting by Fergal Smith; Editing by Richard Chang
