29.08.202513:06:21UTC+00Canadian Dollar Halts Rebound After GDP Data

The Canadian dollar was trading around 1.38 per US dollar, pausing its recovery from the two-month low of 1.39 experienced on August 21st. This change occurred in the wake of Canada’s second quarter economic growth figures, which significantly fell short of expectations, thereby increasing the likelihood of an easing by the Bank of Canada (BoC). This development counterbalanced the slight weakening of the US dollar. According to Statistics Canada, real GDP dropped by 0.4% on a quarter-over-quarter basis in the second quarter, primarily due to a 7.5% decline in exports influenced by US tariffs. Additionally, there was a decrease in business investments, especially in machinery and equipment, as well as a reduction in inventories by firms. Meanwhile, the household saving rate declined to 4.8%, with only a 0.2% growth in compensation, indicating a slowdown in domestic economic momentum that previously supported the Canadian dollar. Furthermore, the economic growth differential with the United States expanded following the Bureau of Economic Analysis's second estimate, showing the US GDP growing at an annualized rate of 3.3% in Q2. This has reinforced expectations that Canada will need to lower its policy rate sooner and more significantly than the Federal Reserve, thus weakening support for the Canadian dollar, even as the US dollar index remains uncertain amid recent PCE data.