* U.S. dollar up 0.3 percent at C$1.3176
* Canada factory sales rose 1.4 percent in May from April
* Spread between the U.S. Canadian 10-year yields widens
* Canadian government bond prices higher across yield curve
By Gertrude Chavez-Dreyfuss
July 17 (Reuters) - The Canadian dollar slid against the U.S. dollar on Tuesday, pressured by some modest risk aversion ahead of U.S. Federal Reserve Chairman Jerome Powell's first congressional testimony on the U.S. economy and monetary policy later in the session.
Powell is expected to repeat the Fed's stance of a gradual monetary tightening, but analysts would be watching out for remarks on global trade tensions and how that would impact the pace of future U.S. rate increases.
Data showing Canada's factory sales rose 1.4 percent in May from April trimmed the Canadian currency's losses versus the greenback, but that had a brief impact. the outlook for the Canadian dollar remained negative, analysts said, even though the Bank of Canada raised interest rates last week for the fourth time since July 2017, as the market has yet to fully price in the impact of global trade tensions.
"Domestic rate expectations have softened modestly and yield spreads have widened in a CAD-negative manner," said Eric Theoret, currency strategist at Scotiabank in Toronto.
The spread between the U.S. 10-year Treasury and Canadian 10-year yields has widened to nearly 74 basis points US10CA10=RR .
In early morning trading, the U.S. dollar was up 0.3 percent at C$1.3176 CAD=D3 against the Canadian unit. So far this year, the Canadian dollar has been down 4.7 percent against a strong U.S. currency.
The Canadian dollar was also lower against the euro, which rose 0.2 percent to C$1.5409 EURCAD= . Sterling, however, fell 0.3 percent to C$1.7340 GBPCAD= .
The U.S. dollar, meanwhile, was up 0.2 percent against a basket of six major currencies at 94.699 .DXY .
Meanwhile, Canadian government bond prices were higher across much of the yield curve in line with U.S. Treasuries.
The two-year yield CA2YT=RR was down at 1.915 percent, compared with 1.929 percent late on Monday, while the 10-year CA10YT=RR slipped to 2.113 percent from Monday's 2.138 percent.