USD/CAD recovers to near 1.4040 after weak Canadian GDP data

• USD/CAD bounces back from 1.3980 after the Canadian GDP data release, which was broadly weaker than expected.
• The Canadian economy grew by 0.1% in September, slower than estimates of 0.3%.
• A slight rebound in the US Dollar has also prompted the Loonie pair's recovery.

The USD/CAD pair rebounds after posting a fresh three-day low near 1.3980 in Friday's North American session. The Loonie pair bounces back as Statistics Canada has reported slower-than-expected Gross Domestic Product (GDP) growth in September month. The agency showed that the Canadian economy expanded by 0.1% after remaining flat in August. Economists expected the economy to have risen by 0.3%

The agency also reported that growth in the third quarter of the year was 0.3%, slower than 0.5% in the previous quarter. Meanwhile, in comparison to the third quarter of the previous year, the GDP growth was 1%, as expected, softer than the 2.2% growth in the second quarter of the current year.

Moderate expansion in the Canadian output is expected to boost expectations of more outsized interest rate cuts by the Bank of Canada (BoC). The BoC reduced its key borrowing rates by 50 bps in October.

Meanwhile, a slight recovery in the US Dollar (USD) has also pushed the Loonie pair higher. The USD recovered some of its intraday losses, suggesting that a near-term low has been formed. The US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, bounces back after registering a fresh two-week low near 105.60.

The correction in the US Dollar started when United States (US) President-elect Donald Trump nominated Scott Bessent to fill the position of Treasury Secretary. Market participants expect Bessent to execute Trump-stated trade policies strategically and gradually that won't prompt inflationary pressures swiftly.