USD/CAD finds intermediate support above 1.3400 on Canada’s sluggish GDP

• USD/CAD discovers a cushion near 1.3420 on Canada’s stagnant GDP and soft US core PCE data.
• US monthly core PCE expanded at a nominal pace of 0.1%. The annualized data decelerated to 3.9%.
• Oil prices retreat after a short-lived pullback to near $93.00 as global slowdown fears remain intact.

The USD/CAD pair discovered buying interest near 1.3420 in the early New York session. The Loonie asset finds support after Canada’s weak monthly Gross Domestic Product (GDP) and soft United States Personal Consumption Expenditure (PCE) price index reports.

The US Bureau of Labor Statistics reported that monthly core PCE expanded at a nominal pace of 0.1% in August against expectations and the former release of 0.2%. The annualized PCE has softened to 3.9% as expected from the former release of 4.3%.

Headline PCE grew by 0.4%, doubling from July’s pace but remained slower than expectations of 0.5%. The headline data was expected to remain hot due to rising energy prices. Monetary receipts at oil stations were significantly higher as global oil prices have rallied more than 30% in the past three months.

A decline in core expenditure data may soften consumer inflation ahead and would discourage Federal Reserve (Fed) policymakers from raising interest rates further. Meanwhile, chances that interest rates will remain steady at 5.25%-5.50% at the November monetary policy meeting have recovered to 83% from 77% on Thursday, according to the CME Fedwatch tool.

The US Dollar Index (DXY) finds interim support near 105.70. Further action in the US Dollar will be guided by the US ISM Manufacturing PMI report for September, which will be published on Monday.

Meanwhile, the Canadian Dollar comes under pressure as Canada’s growth rate remained stagnant in July while investors anticipated a nominal growth at 0.1%. In June, the GDP contracted 0.2%. On the oil front, oil prices retreat after a short-lived pullback to near $93.00 as global slowdown fears remain intact.

It is worth noting that Canada is the leading exporter of oil to the United States and a decline in oil prices impacts the Canadian Dollar.