CAD Strengthens Following North American GDP Data

The Canadian dollar strengthened to 1.36 per USD, a one-month high, on support from a weaker greenback as markets assessed the outlook for the Bank of Canada. The US dollar pulled back as energy prices halted their rally and drove emerging markets to limit their aggressive pivot to the greenback. On top of that, an acceleration in domestic wages also supported the loonie. Meanwhile, data showed Canada’s GDP stalled in March, suggesting high energy prices weighed on overall spending. The outcome aligned with the BoC’s decision to hold rates this week, noting that inflation remains stable and that rising energy costs have not yet unanchored household expectations, dismissing an immediate need for more restrictive policy.

The Canadian dollar was stable at 1.37 per USD following the Bank of Canada's and the US Fed decisions to hold interest rates. The BoC kept its policy rate at 2.25% and stated that it does not expect the recent surge in energy prices to de-anchor inflation expectations, limiting the view of a potential hike this year. Meanwhile, the US dollar inched higher as markets increased exposure to safe-haven assets amid no signs of de-escalation between the US and Iran. The Fed held its benchmark interest rate in the range of 3.5% to 3.75%, citing the surge in oil prices and increased economic uncertainty from the Iran war.

The Canadian dollar weakened to 1.37 per USD from the one-month high of 1.36 on April 27th, following the Bank of Canada's decision to hold interest rates. The central bank kept its policy rate at 2.25% and stated that it does not expect the recent surge in energy prices to de-anchor inflation expectations, limiting the view of a potential hike this year. Meanwhile, the US dollar strengthened as markets increased exposure to safe-haven assets on no signs of de-escalation between the US and Iran. The US Federal Reserve is also set to announce its next move on interest rates today with expectations of a hold, mirroring the BoC's cautious approach as it weighs the threat of the Iran war to its economy against the potential for a surge in inflation.