Canada's GDP weaker than expected, Canadian dollar shrugs

[Ben Graham]

The Canadian dollar is coming off its first winning week since July. USD/CAD is calm on Monday, trading at 1.3739, down 0.04% on the day.

Canada's GDP for June was a disappointment, declining 0.1% m/m in June. This was unchanged from May and missed the market estimate of 0.1%. The decline was driven by decreased activity in manufacturing, as US tariffs made themselves felt in the Canadian economy.

Quarterly, GDP fell by 1.6% in Q2, after a downwardly revised gain of 2% in Q1. This missed the market estimate of -0.6%. Notably, this was the first quarterly contraction in seven quarters, as US tariffs took a toll on Canadian exports.

The weak GDP release has raised expectations of a Bank of Canada rate cut at the September 17 meeting. The money markets have raised the likelihood of a quarter-point cut to 48%, up from 40% just prior to the GDP report. The BoC has maintained rates at 2.75% at three consecutive meetings and the employment and inflation data for August will be critical in determining whether the central bank holds or cuts rates.

US PCE core inflation hits five-month high

The US core personal consumption expenditures price index (core PCE) the Federal Reserve's preferred inflation indicator, crept higher to 2.9% in July, up from 2.8% in June. This was the highest level since February and matched the market estimate. Monthly, core PCE rose 0.3%, unchanged from June and in line with the market estimate.

USD/CAD Technical

• USD/CAD is testing resistance at 1.3742. Above, there is resistance at 1.3751 and 1.3761
• Below, there is support at 1.3732 and 1.3723

USDCAD 4-Hour Chart, September 1, 2025

Opinions are the authors'; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. The provided publication is for informational and educational purposes only.
If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please refer to the MarketPulse Terms of Use.
Visit https://www.marketpulse.com/ to find out more about the beat of the global markets.
© 2025 OANDA Business Information & Services Inc.