The loonie closed off the highs of the session, up 0.09 of a cent at 98.2 cents US.
U.S. retail sales rose by only 0.1 per cent in December against expectations for a 0.2 per cent rise. And during the most important month of the year for retailers, the strength last month was led by a 1.5 per cent jump in auto sales.
Also, applications for weekly unemployment benefits spiked by 24,000 to 399,000 last week, largely because companies let go of thousands of workers after the year-end holiday season.
The negative data came after a string of recent news had reassured investors that the economic recovery was continuing and the United States should be able to avoid slipping back into recession.
Reports showed faster than expected expansion in the manufacturing sector, employment growth last month exceeding expectations and the Federal Reserve saying all but one of its 12 banking districts experienced some growth from late November through the end of the year.
Meanwhile, there was relief on financial markets as Italy saw its borrowing costs drop sharply while easily selling €12 billion in bonds in its first test of market sentiment of the new year.
Among other issues, investors bought €8.5 billion in 12-month bonds at a yield of 2.735 per cent, sharply down from last month’s rate of 5.95 per cent.
And Spain successfully raised nearly €10 billion in debt auctions Thursday in a sign of investor confidence in the new conservative government’s attempts to get a grip on the country’s debt.
The treasury said demand for the three bonds, which mature in 2015 and 2016, was strong and the amount sold was double the maximum sought.
The solid showing from both bond auctions comes after the European Central Bank offered late last month to lend US$641 billion to 523 euro-area banks in a massive three-year funding operation.
And analysts said the auction signalled that instead of just stashing the money with the ECB, that banks were actually putting the money to work.
"Today’s auctions are the first sign of hope that the funds from the LTRO (longer-term refinancing operation) are finding their way back into bonds and thereby supporting sovereign markets," said Scotia Capital chief currency strategist Camilla Sutton.
"This is positive for risk assets and has helped support a rally today."
Borrowing costs shot up late last year for heavily indebted countries as markets grew increasingly frustrated with the lack of a comprehensive plan to deal with the eurozone’s debt crisis.
At one point, Italy was forced to offer yields of over seven per cent for its benchmark 10-year bonds, a level considered unsustainable in the long run.
Meanwhile, the European Central Bank said it was leaving its key interest rate unchanged at one per cent following two consecutive rate cuts.
Markets are looking for signs about whether the bank could cut rates further in coming months. The ECB has never taken its benchmark rate below 1.0 per cent in its 13-year history.
Following the decision, ECB President Mario Draghi Draghi told a news conference that recent economic indicators had shown "tentative signs of stabilization of activity at low levels."
Britain’s Bank of England also left rates unchanged.
Commodities were mixed with oil giving up early, strong gains to close down $1.77 to US$99.10 a barrel after going as high as US$102.98. The about-face followed a report from Bloomberg News that a European Union embargo on imports of Iranian oil would probably be delayed for six months to allow countries such as Greece, Italy and Spain to find alternative supplies.
Metal prices ran up sharply with March copper up 10 cents to US$3.64 a pound. Copper has surged about five per cent this week on trade data from China that suggested authorities could be ready to ease lending requirements to encourage growth. The metal, considered a global economic bellwether because it is used in so many businesses, also got lift from solid revenue figures and a positive outlook from resource giant Alcoa Inc.
Bullion prices rose for a third day with the February contract up $8.10 at US$1,647.70 an ounce.