USD/CAD Update
The USD/CAD currency pair lost some of its early gains on Tuesday, with the Canadian dollar gaining strength following unexpected positive GDP figures. As of now, the exchange rate sits around 1.4203, down from an intraday peak of 1.4247.
Statistics Canada reported that the economy saw a growth of 0.5% in April, bouncing back from a contraction of 0.1% in March, which exceeded expectations of a 0.4% increase.
This growth was fueled by increases across both goods and services sectors, with 14 out of 20 sectors experiencing growth in April.
The preliminary data from Statistics Canada suggests a smaller GDP growth of 0.1% in May, indicating that the economy may be stabilizing after two quarters of contraction.
This positive GDP release comes on the heels of stronger-than-anticipated inflation and employment figures from earlier this month. Specifically, the Consumer Price Index (CPI) rose from 2.8% in April to 3.2% in May, while employment surged by 87,000, recovering from a loss of 17,000 the previous month.
Given this context, the Bank of Canada (BoC) might adopt a cautious stance, possibly keeping interest rates steady until inflation shows signs of moderation.
On another note, the U.S. dollar’s strength continues to cap any significant declines in the USD/CAD pair, keeping it in the range seen back in April 2025.
The dollar remains buoyed by expectations that the Federal Reserve will implement interest rate hikes this year, with current market assessments indicating a 63% likelihood of a rate increase in September, according to the CME FedWatch tool.
Additional support for the dollar is driven by ongoing uncertainties in U.S.-Iran negotiations, rising geopolitical tensions, and a sustained demand for the safe-haven U.S. dollar.
Iran’s Foreign Ministry spokesperson, Esmail Baghai, noted that discussions with Qatari mediators regarding a U.S. interim agreement will likely occur in Doha on Wednesday. However, there aren’t any direct talks planned between the U.S. and Iran, despite the arrival of a U.S. envoy in Doha on Tuesday.
In the latest job market data, the U.S. JOLTS report indicated an increase in available jobs to 7,594,000 in May, surpassing market expectations of 7.3 million and showing a slight rise from April’s adjusted figure of 7,585,000.
