Canadian Dollar Stalls at 18-Week Lows Despite GDP Rebound

The Canadian Dollar (CAD) managed to pump the brakes on its sharp descent against the US Dollar (USD) to close the week, but the respite was limited. Despite cooling its bearish momentum on Friday, the Loonie still touched fresh 18-week intraday lows, confirming its position on the weak side of key moving averages against the Greenback after a week of sustained losses.

Some thin support for the Canadian currency came from a domestic economic bright spot: Canadian Gross Domestic Product (GDP) growth unexpectedly rebounded in July, accelerating to 0.2% month-over-month. This beat market forecasts for a 0.1% uptick and contrasted with the previous month’s contraction. However, this positive news appears insufficient to significantly shift overall market flows in the near-term.

Meanwhile, the US Dollar saw a brief weakening after the release of the US Personal Consumption Expenditure (PCE) Price Index. The inflation reading came in largely in line with market expectations, which kept sentiment focused on high odds of a follow-up interest rate cut from the Federal Reserve (Fed) in October. Despite this general softening of Greenback flows, the Canadian Dollar is still struggling to find solid ground.

Looking ahead, the next week promises another US-heavy economic data docket, with attention already turning to the looming release of Nonfarm Payrolls (NFP) jobs data next Friday. Market expectations for a second consecutive 25 basis point rate cut by the Fed in October remain high, with rate markets pricing in nearly 90% odds for a follow-up trim on October 25th, a key factor that will continue to influence CAD/USD movements.