USD/CAD gains traction above the 1.3230 mark, investors await Canadian GDP, US PCE

• USD/CAD gains momentum near 1.3230 ahead of the economic data released from Canada and the US.
• The Federal Reserve (Fed) Chairman Jerome Powell left the room for another 25 bps rate hike this year.
• BoC Governor Tiff Macklem said future policy decisions will be based on the incoming data and inflation.

The USD/CAD pair retreats from 1.3248 and currently trades around 1.3225, up 0.01% for the day. The encouraging GDP figure supports the uptick of the US Dollar. The US Dollar Index (DXY), a measure of the Greenback against a basket of currencies used by US trade partners, holds above 101.70 heading into the early European session. Market participants will keep an eye on the economic data for fresh impetus later in the North American session.

Following the release of upbeat US economic statistics on Thursday, the US dollar has attracted some buyers across the board. The US Bureau of Economic Analysis (BEA) first estimate reported that the US real Gross Domestic Product (GDP) expanded at a 2.4% annualized rate, beating the market expectation of 1.8% and following the 2% growth reported in the first quarter. Meanwhile, Durable Goods Orders rose 4.7% on a monthly basis to $302.5 billion. Initial Jobless Claims declined by 7,000 to 221,000 in the week ending July 22, the lowest reading in five months. The data bolstered optimism that the economy could avoid a recession this year. This, in turn, could support the Greenback and cap the upside in the commodity-linked Loonie.

After the July policy meeting, Fed Chairman Jerome Powell said it’s possible for another 25 basis point (bps) rate rise in September or November if the data warrants it. The more hawkish stance of the Fed than the Bank of Canada (BoC) acts as a tailwind for the USD/CAD pair. 

On the Canadian Dollar front, the BoC announced a 25 basis point rate hike to a 22-year high of 5.0% on July 12. BoC Governor Tiff Macklem stated that the central bank would base future policy decisions on the incoming data and the inflation outlook. It's worth noting that the next policy meeting is scheduled for September 6.

However, market players anticipated that the Bank of Canada (BoC) would likely not see the need to raise rates further this year. According to a survey of market participants released by the central bank on Monday, a median of the participants anticipate the bank to maintain interest rates at a 22-year high of 5.00% until the end of 2023 before cutting the rates in March.

Meanwhile, the uptick in oil prices has supported the Loonie and offset a slowdown in the Canadian manufacturing sector. Higher crude prices strengthen the Canadian Dollar, as the country is the leading oil exporter to the United States. 

Later in the day, investors will closely watch the Canadian Gross Domestic Product (GDP) data. The figure is expected to rise by 0.3% from the previous reading of 0%. Also, the Fed's preferred inflation gauge, US Core Personal Consumption Expenditure (PCE) report, will be released in the North American session. The inflation figure is expected to drop from 4.6% to 4.2% annually. The data will be critical for determining a clear movement for the pair ahead of next week's employment data.