Canadian Dollar Under Pressure as Flat GDP and Strong USD Persist

The Canadian Dollar remains under pressure despite a flat GDP reading in July. The Gross Domestic Product was unchanged, matching market expectations and slowing from the 0.4% growth recorded in June, which was revised higher from 0.3%. The economy is expected to expand by 0.2% in August, led by higher output in mining and retail trade.

The Bank of Canada (BoC) expects annualized growth of 1.5% in the third quarter, but economists at the Royal Bank of Canada noted that the July report leaves the BoC balancing potential downside economic growth risks against resilient backward-looking data.

The US Dollar remains supported by expectations that the Fed will continue raising interest rates after delivering a 25 bps hike earlier this month. The US Dollar Index (DXY) holds near 101.37, near two-month highs, and attention now turns to key economic indicators later this week, including the US Personal Consumption Expenditures (PCE) Price Index, ISM Manufacturing Purchasing Managers’ Index (PMI), and Nonfarm Payrolls (NFP).