Canadian Dollar slides to 1.3800 vs firmer USD amid weak Oil prices, ahead of Canadian GDP

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USD/CAD attracts some dip-buyers on Friday and draws support from a combination of factors.
Oil prices languish near a monthly low amid US-Iran peace deal optimism, undermining the Loonie.
Hawkish Fed expectations support the USD and the currency pair ahead of the Canadian GDP.

The USD/CAD pair climbs to the 1.3800 mark during the first half of the European session on Friday, reversing a part of the previous day's retracement slide from the highest level since April 13 amid a combination of supporting factors. Crude Oil prices retest monthly low amid the optimism over a potential US-Iran peace deal, undermining the commodity-linked Loonie. This, along with the emergence of some US Dollar (USD) dip-buying, lends additional support to the currency pair.

Axios, citing two US officials, reported that the US and Iran have reached a draft agreement to extend the ongoing ceasefire for 60 days. This helps ease concerns about a prolonged disruption to oil flows through the region and continues to weigh on Crude Oil prices for the third straight day. Meanwhile, the latest peace proposal still requires final approval from US President Donald Trump. Moreover, investors remain skeptical about a deal to end a three-month-old war amid major US-Iran disagreements over Tehran's nuclear program and the Strait of Hormuz.

Adding to this, the resumption in open hostilities between the US and Iran keeps the market enthusiasm in check, benefiting the USD's safe-haven status. Adding to this, market expectations that the US Federal Reserve (Fed) will raise borrowing costs in 2026 amid sticky inflation turn out to be another factor supporting the Greenback and the USD/CAD pair. In fact, the US Bureau of Economic Analysis (BEA) reported on Thursday that the Personal Consumption Expenditures (PCE) Price Index accelerated to the 3.8% YoY rate in April from 3.5% in the previous month.

Moreover, the core gauge, which excludes volatile food and energy prices, rose 3.3%, as anticipated. This reinforced expectations that the Fed may need to keep rates elevated for longer, offsetting a downward revision to the US Q1 GDP growth figures. The USD bulls, however, seem hesitant and opt to wait for further developments surrounding the Middle East crisis. Apart from this, speeches from influential FOMC members would drive the USD later today. Furthermore, the monthly Canadian GDP print should produce trading opportunities around the USD/CAD pair.

Economic Indicator

Gross Domestic Product (MoM)

The Gross Domestic Product (GDP), released by Statistics Canada on a monthly and quarterly basis, is a measure of the total value of all goods and services produced in Canada during a given period. The GDP is considered as the main measure of Canadian economic activity. The MoM reading compares economic activity in the reference month to the previous month. Generally, a high reading is seen as bullish for the Canadian Dollar (CAD), while a low reading is seen as bearish.