USD/CAD recovers intraday losses after upbeat revised US Q2 GDP

• USD/CAD licks its wounds as the US Dollar extends its upside.
• The upbeat second estimate of the US Q2 GDP boosted the US Dollar’s recovery.
• Investors await the US PCE inflation for July and Canada’s Q2 GDP data.

The USD/CAD pair recovers its entire intraday losses and attempts to reclaim the psychological resistance of 1.3500 in Thursday’s North American session. The Loonie asset bounces back strongly as the US Dollar (USD) extends its upside after the United States (US) Bureau of Economic Analysis (BEA) reported that the pace at which the economy grew in the second quarter was higher than it initially appeared.

The agency reported that the economy grew at a robust pace of 3% on an annualized basis against the preliminary estimates of 2.3%. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, climbs to near 101.50.

Meanwhile, major action in the US Dollar will be driven by the US Personal Consumption Expenditure Price Index (PCE) data for July, which will be published on Friday. The PCE report is expected to show that year-on-year core inflation rose at a faster pace of 2.7% from 2.6% in June, with monthly figures growing steadily by 0.2%. The inflation data would significantly influence market speculation for the Federal Reserve’s (Fed) September monetary policy.

Currently, financial markets seem to be confident that the Fed will start reducing interest rates in September. However, traders remain split over the potential size by which the Fed will pivot to policy-normalization.

In the neighboring nation, upbeat Oil prices continue to keep the Canadian Dollar’s (CAD) broader appeal upbeat. The Oil price bounces back strongly amid escalation in Middle East tensions. It is worth noting that Canada is the largest exporter of Oil to the US, and higher oil prices increase Greenback flows into Canada, strengthening the Canadian Dollar.

On the economic front, investors await the monthly and Q2 GDP data, which will be published on Friday. The Canadian economy is estimated to have barely grown in June. Annualized Q2 GDP is projected to have risen at a slower pace of 1.6% from the prior release of 1.7%.