FX.co ★ Canadian Dollar Loses Ground After GDP Data

The Canadian dollar weakened, surpassing C$1.40 per US dollar, primarily due to an unexpectedly weak GDP report. This development led markets to anticipate a higher likelihood of an additional rate cut by the Bank of Canada. Concurrently, a strengthening US dollar added further downward pressure. Projections suggest Canadian GDP will rise by 0.1% in September, following a revised contraction of 0.3% in August, marking the largest monthly decline since December 2022. This adjustment highlights the significant impact of trade tensions with the United States and the negative effects of elevated Bank of Canada policy rates. Previously, markets had considered the recent rate cut by the Bank of Canada as anticipated and instead focused on the Bank’s data-driven policy guidance amid emerging weaknesses, despite ongoing high inflation with headline CPI at approximately 2.4% year-on-year and the Bank’s trimmed measure at around 3.1%. Simultaneously, the US dollar gained strength following the Federal Reserve's widely expected 25 basis point rate cut, as Chair Jerome Powell cautioned that an additional rate adjustment in December is not assured.