The USD/CAD retraces after hitting a daily high of 1.3645 after the release of the United States (US) Gross Domestic Product (GDP) triggered fears of an upcoming recession in the United States (US). Consequently, the US Dollar (USD) advanced, but also the Canadian Dollar. Therefore, the USD/CAD is trading at 1.3619, below its opening price by 0.13%.

USD/CAD ignored the data and fell despite the US Dollar strength

As mentioned above, the US Department of Commerce revealed the Advance GDP for Q1 2023, which came at 1.1% QoQ, missing estimates of 2.0%. The print is the preliminary reading, though it’s the most market-moving. In addition, the US Department of Labor (DoL) revealed that Initial Jobless Claims were lower than estimated, snapping three consecutive reports that flashed signs that the labor market was easing.

Of note, on the GDP report, the core Personal Consumption Expenditure (PCE) for the first quarter rose by 4.9%, above estimates, justifying the Fed’s intention to raise rates by 25 bps next week. The CME FedWatch Tool shows that the swaps markets depict that odds for a quarter of a percentage hike lie at 87.1%, above yesterday’s intentions.

After the data release, the USD/CAD edged toward 1.3640 before falling toward the daily low of 1.3591, correcting upwards and exceeding 1.3600. OF late, the rise in crude oil prices of more than 1% underpins the Canadian Dollar (CAD), with the USD/CAD threatening to break below the 1.3600 mark.

On the Canadian front, Payrolls rose 62.5K in February, and Weekly Earnings increased by 1.8% YoY.