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Canadian dollar slips after strongest GDP growth since early 2023
Canada’s GDP rose 3.3% annualized in Q2, with exports up 3.6% and autos contributing to the rebound, yet USD/CAD stayed just below 1.3900.
FXStreet reports Canada posted its strongest GDP growth figure of the cycle, with Q2 GDP rising 3.3% annualized, the fastest pace since early 2023 and above the Bank of Canada forecast of 2.5%. A revision to the prior quarter erased a technical recession framing rate discussions in Ottawa.
Despite the improved growth data, the Canadian dollar weakened, with USD/CAD trading just beneath 1.3900 on Friday. The report noted that the economy’s stronger composition included exports rising 3.6% on the quarter, the largest increase in three years, and a 27% jump in passenger car and light truck shipments as domestic auto production rebounded.
Other components cited included business capital investment up 2.3%, ending a five-quarter losing streak, and June activity rising 0.3% versus a 0.2% forecast. FXStreet also tied future pressure points to trade timing, citing a planned 50% American duty on about C$27.6 billion of Canadian goods on August 22, and matching measures taking effect September 8.
FXStreet further linked the near term move in USD/CAD to expectations for the Federal Reserve after chair Kevin Warsh’s Jackson Hole remarks, which pushed two-year Treasury yields to a one-month high. Market pricing now implies a quarter-point rate increase at the September 16 meeting above 55%, while the Bank of Canada meets next on September 2 and is priced for a hold.