Canadian GDP Surprise Lifts Loonie, Pressures USD/CAD Rally

Key Moments

USD/CAD pulled back from an intraday high of 1.4247 to around 1.4203 after Canadian GDP for April rose 0.5%.
Statistics Canada’s advance estimate pointed to a further 0.1% GDP increase in May, following two consecutive quarterly contractions.
Despite CAD strength, USD support from Fed rate-hike expectations and geopolitical risks kept USD/CAD near levels last seen in April 2025.

Canadian Data Boosts CAD, Cuts Into USD/CAD Gains

USD/CAD pared its intraday advance on Tuesday as the Canadian Dollar (CAD) firmed in response to stronger-than-anticipated Canadian Gross Domestic Product (GDP) figures. The currency pair was last seen trading near 1.4203, retreating from an earlier intraday peak of 1.4247.

According to Statistics Canada, the Canadian economy expanded by 0.5% in April, reversing a 0.1% decline in March and surpassing expectations for a 0.4% gain. The rebound was broad-based, as both goods-producing and service-producing industries contributed to the improvement, with 14 of 20 sectors advancing in April.

Statistics Canada’s advance estimate indicated that GDP likely grew another 0.1% in May, signaling that activity may be stabilizing after the economy contracted in the prior two quarters.

Macro Backdrop: Inflation, Labor Market, and BoC Outlook

The GDP data followed a series of stronger Canadian macro releases earlier in the month. Canada’s Consumer Price Index (CPI) accelerated to 3.2% year-on-year in May from 2.8% in April. At the same time, employment rose by 87.8K, a sharp turnaround from a decline of 17.7K in the previous month.

Within this context, the Bank of Canada (BoC) may opt to maintain its current stance and keep interest rates unchanged, pending clearer evidence that inflationary pressures are easing.

US Dollar Backdrop: Fed Expectations and Geopolitical Support

Even as CAD strength weighed on USD/CAD, downside in the pair remained limited by ongoing support for the US Dollar (USD). The exchange rate stayed close to levels last observed in April 2025.

The Greenback continued to benefit from market expectations that the Federal Reserve (Fed) will raise interest rates this year. Traders were pricing in a 63% probability of a rate hike in September, based on the CME FedWatch Tool.

Geopolitical uncertainty also underpinned demand for the USD. Persistent tension around US-Iran negotiations helped sustain safe-haven flows. Iran’s Foreign Ministry spokesperson Esmaeil Baghaei said talks with Qatari mediators on the interim US deal are likely on Wednesday in Doha. However, no direct US-Iran meetings were planned, even as the US envoy arrived in Doha on Tuesday.

US Data: JOLTS Job Openings Edge Higher

On the US data front, JOLTS Job Openings rose to 7.594 million in May, exceeding the consensus forecast of 7.3 million and coming in slightly above April’s revised level of 7.585 million.

US Dollar Performance Against Major Currencies

The table below summarizes the current percentage changes of the US Dollar against major currencies. On the day, the USD showed its strongest performance versus the Japanese Yen.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.08%	0.12%	0.32%	-0.06%	-0.29%	-0.45%	0.10%
EUR	-0.08%		0.04%	0.19%	-0.20%	-0.38%	-0.54%	0.00%
GBP	-0.12%	-0.04%		0.13%	-0.23%	-0.41%	-0.57%	-0.04%
JPY	-0.32%	-0.19%	-0.13%		-0.36%	-0.58%	-0.71%	-0.19%
CAD	0.06%	0.20%	0.23%	0.36%		-0.24%	-0.36%	0.17%
AUD	0.29%	0.38%	0.41%	0.58%	0.24%		-0.13%	0.40%
NZD	0.45%	0.54%	0.57%	0.71%	0.36%	0.13%		0.51%
CHF	-0.10%	-0.01%	0.04%	0.19%	-0.17%	-0.40%	-0.51%

The heat map is read by choosing the base currency from the left column and the quote currency from the top row. For instance, selecting the US Dollar as the base currency and moving along to the Japanese Yen cell shows the percentage move for USD (base)/JPY (quote).