Canadian Dollar recovers on Friday despite Canadian GDP miss

• Broad-market risk appetite recovers on Friday as US PCE inflation eases.
• Canada saw a weaker-than-expected rebound in GDP.
• US PCE inflation cooled further, fueling rate cut hopes.

The Canadian Dollar (CAD) is broadly higher on Friday, but gains are capped after softer-than-expected prints in Canadian economic data. Investor hopes for a September rate cut are riding higher after US Personal Consumption Expenditures (PCE) Price Index inflation eased faster than expected, and rate markets are once again pricing in better-than-even odds of a rate trim from the Federal Reserve (Fed).

Canada saw a slimmer rebound in quarterly Gross Domestic Product (GDP) growth than markets had anticipated, limiting overall gains for the CAD. With US inflation headlines driving broader markets, risk sentiment is on the high side to wrap up the week and investors will be pivoting to next week’s Bank of Canada (BoC) rate call, as well as a batch of US Purchasing Managers Index (PMI) prints and another Nonfarm Payrolls in the pipe for next Friday.