USD/CAD rallies on weak Canada GDP, mixed US data

After gloomy economic data from Canada, the USD/CAD pair headed forward toward the 1.3600 mark, while the US dollar registers some losses. Market sentiment shifted sour as US equities opened in the red territory. At the time of writing, the USD/CAD pair is trading at 1.3601 versus the previous closing at 1.3574.

Statistics Canada revealed the Gross Domestic Product for Q4, which was expected at 2.9% QoQ, though missed estimates and came flat at 0%. According to the agency, inventory accumulations and declines in business investment, mainly machinery, and equipment were the reasons for weaker growth in Q4.

The reading is negative, and it takes the pressure off the Bank of Canada that announced at its last monetary policy meeting that it would pause rate hikes. Consequently, further USD/CAD strength is warranted, as the US Federal Reserve (Fed) is expected to continue its tightening cycle with speculation around the financial markets that the Fed could go as high as 6%.

The USD/CAD jumped after the data release and printed a daily high of 1.3609. Nevertheless, the dust had settled, and the major retraced toward the 1.3590s area.

On the US front, monthly house prices dropped in December by 0.1% MoM, in data published by the US Federal Housing Finance Agency showed on Tuesday. At the same time, the S&P/Case-Shiller Home Price Index arrived at 4.6% YoY in December, down from 6.8% in November and lower than analysts’ estimate of 6.1%.