USD/CAD hits session highs in upper 1.2600s post-underwhelming Canadian GDP data

• USD/CAD hit session highs in the upper 1.2600s in wake of underwhelming Canadian GDP figures.
• Focus now turns to upcoming tier two US data, the Biden/Powell meeting, and whether month-end USD strength can continue.

The Canadian dollar, which had been holding up relatively well versus a strengthening US dollar, has been on the back foot in recent trade in wake of a worse than expected Canadian GDP data release. Granted, the MoM pace of growth in March was stronger than expected at 0.7%, but GDP growth as a whole for the first quarter was much lower than expected, coming in at an annualised quarterly pace of 3.1% versus expectations for 5.4%.

That has been enough to send USD/CAD to fresh session highs in the 1.2680s, with the pair now trading with gains of about 0.2% on the day. Previously, higher oil prices as a result of the EU’s agreement on Tuesday quickly phase out all imports of seaborne Russian crude oil had been weighing on the pair.

Looking ahead, attention turns to various tier two US data releases including some home price figures, the May Chicago PMI survey and the May CB Consumer Confidence survey, as well as a meeting between Fed Chair Jerome Powell and US President Joe Biden. Traders will be assessing whether month-end USD strength can continue as US markets reopen following the long weekend, or whether the recent trend of weakening as a result of easing US inflation concerns/Fed tightening bets starts to weigh once again.