Hopes for the ratification of Canada's trade agreements with the United States and the European Union, as well BoC's reluctance to follow its colleagues lowering rates, and favorable oil market conditions for most of the year, have helped keep the USD/CAD quotes at their lowest levels since October 2018.
It would seem that the latest data on Canadian GDP were to give strength to the "bulls" for the "loonie". The economy of the Maple Leaf Country in May accelerated by 0.2% in monthly terms. The growth rate was recorded for the third month in a row. This increased the chances that the indicator will rise by 3% in the second quarter.
However, the decline in oil prices and fears that the Bank of Canada will follow the path of the Federal Reserve will put sticks in the wheels of the USD / CAD "bears", despite the improvement in macroeconomic indicators.
The strengthening of the Canadian currency holds back inflation in the country and the fact that the Fed pays more attention to international risks and not to internal statistics makes BoC doubt its passive position. In addition, the yield curve of Canadian government bonds sank to its lowest level since 2000. The latter indicates an approaching recession, as well as the fact that sooner or later the Central Bank will have to lower its interest rate. It is expected that this will happen in December, although much can still change before the end of the year. The derivatives market expects three acts of monetary expansion from the Fed this year. If BoC begins to mitigate monetary policy only at the end of the year, then the USD/CAD pair may well return around 1.3.