Breaking: Canada GDP surprised to the upside in Q3
- Canada's economy grew at an annual rate of 2.6% in Q3.
- USD/CAD is on the back foot and approaches the 1.4000 zone.
Canada’s economy picked up speed in the July-September period. Indeed, the Gross Domestic Product (GDP) grew by 0.6% QoQ in the third quarter, reversing the previous 0.5% contraction (revised from -0.4%), according to data released Friday by Statistics Canada.
On an annualised basis, the economy expanded 2.6% in the third quarter, well above expectations of 0.5% and the 1.8% contraction from last year. On a monthly basis, GDP expanded 0.2% in September.
From the press release: “Real gross domestic product (GDP) increased 0.6% in the third quarter of 2025, after falling 0.5% in the second quarter. The rise in the third quarter was driven by a strengthening trade balance, as imports dropped and exports edged up. Increased capital investment was driven by government capital spending, as business investment was flat. Overall growth was dampened by declines in household and government final consumption expenditures as well as a slower accumulation of business inventory.”
Market reaction
The Canadian Dollar (CAD) keeps its bullish stance on Friday, motivating USD/CAD to add to the weekly leg lower and breach below 1.4000 in the wake of the release of Canadian GDP data.
Canadian Dollar Price Today
The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies today. Canadian Dollar was the strongest against the Euro.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.21% | 0.14% | -0.12% | -0.25% | -0.02% | 0.07% | 0.04% | |
| EUR | -0.21% | -0.07% | -0.34% | -0.45% | -0.22% | -0.13% | -0.17% | |
| GBP | -0.14% | 0.07% | -0.27% | -0.38% | -0.19% | -0.06% | -0.10% | |
| JPY | 0.12% | 0.34% | 0.27% | -0.12% | 0.11% | 0.19% | 0.16% | |
| CAD | 0.25% | 0.45% | 0.38% | 0.12% | 0.22% | 0.30% | 0.25% | |
| AUD | 0.02% | 0.22% | 0.19% | -0.11% | -0.22% | 0.10% | 0.02% | |
| NZD | -0.07% | 0.13% | 0.06% | -0.19% | -0.30% | -0.10% | -0.04% | |
| CHF | -0.04% | 0.17% | 0.10% | -0.16% | -0.25% | -0.02% | 0.04% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Canadian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent CAD (base)/USD (quote).
(This story was corrected on November 28 at 14:02 GMT to say that the previous QoQ GDP figure was revised from -0.4%, not -1.6%)
This section below was published as a preview of the Canadian GDP data for the third quarter at 08:00 GMT.
- Canadian GDP is expected to have expanded by 0.2% in September, recovering from a 1.6% decline in August.
- The Bank of Canada sees Q3 GDP expanding by 0.5% from a year earlier.
- The Canadian Dollar has regained some footing since monthly lows.
The release of the Canadian GDP growth rate will be a salient event on the domestic calendar on Friday. Markets expect the economy to have expanded 0.5% during the July-September period compared with the same period a year earlier.
Canadian GDP expected to recover after sinking in Q2
After shrinking at an annualised rate of 1.6% in the previous quarter, the Canadian economy looks to have bounced back nicely, with growth expected to land around 0.5%, which is right in line with what the Bank of Canada (BoC) had been looking for.
On a monthly basis, GDP is forecast to expand by 0.2% in September, recovering from a 0.3% decline in the previous month.
It’s also worth noting that the BoC delivered another 25 basis points rate cut on October 29, taking the policy rate down to 2.25%. During that meeting, officials revised their forecast, projecting growth of approximately 1.1% in 2026 and 1.6% in 2027, as the economy gradually stabilises.
According to analysts at TD Securities, “Q3 National Accounts provide the main risk event this week with another update on how economic activity has evolved into H2, with TD and the market looking for a partial (+0.5%) rebound from the 1.6% pullback in Q2.”
When will the GDP be released, and how could it affect USD/CAD?
Statistics Canada is set to disclose the GDP figures at 13:30 GMT on Friday.
For USD/CAD, a stronger-than-expected result could give the Canadian Dollar (CAD) a brief lift. But any reaction is likely to be short-lived, given that the pair has been moving almost entirely to the rhythm of the US Dollar (USD) lately. And that, in turn, comes down to shifting market expectations about when the next Federal Reserve (Fed) rate cut will be.
Pablo Piovano, Senior Analyst at FXStreet, notes that the Canadian Dollar has managed to appreciate a tad since its lows earlier this month, prompting USD/CAD to slip back toward the sub-1.4100 region. Meanwhile, further gains appear likely above the key 200-day SMA near 1.3922.
Piovano notes that the resurgence of a bullish tone could encourage the pair to challenge the November ceiling at 1.4140 (November 5) before attempting a move to the April peak at 1.4414 (April 1).
Conversely, Piovano highlights that minor support comes at the November base of 1.3971 (November 18), prior to the always-relevant 200-day SMA at 1.3922. The loss of the latter could expose a deeper pullback to the October floor at 1.3887 (October 29) ahead of the September trough at 1.3726 (September 17) and the July valley at 1.3556 (July 3).
“In addition, momentum indicators remain constructive: the Relative Strength Index (RSI) hovers around the 53 level, while the Average Directional Index (ADX) near 20 suggests a still firm trend,” he says.
Bank of Canada FAQs
The Bank of Canada (BoC), based in Ottawa, is the institution that sets interest rates and manages monetary policy for Canada. It does so at eight scheduled meetings a year and ad hoc emergency meetings that are held as required. The BoC primary mandate is to maintain price stability, which means keeping inflation at between 1-3%. Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Canadian Dollar (CAD) and vice versa. Other tools used include quantitative easing and tightening.
In extreme situations, the Bank of Canada can enact a policy tool called Quantitative Easing. QE is the process by which the BoC prints Canadian Dollars for the purpose of buying assets – usually government or corporate bonds – from financial institutions. QE usually results in a weaker CAD. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The Bank of Canada used the measure during the Great Financial Crisis of 2009-11 when credit froze after banks lost faith in each other’s ability to repay debts.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Bank of Canada purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the BoC stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Canadian Dollar.
GDP FAQs
A country’s Gross Domestic Product (GDP) measures the rate of growth of its economy over a given period of time, usually a quarter. The most reliable figures are those that compare GDP to the previous quarter e.g Q2 of 2023 vs Q1 of 2023, or to the same period in the previous year, e.g Q2 of 2023 vs Q2 of 2022. Annualized quarterly GDP figures extrapolate the growth rate of the quarter as if it were constant for the rest of the year. These can be misleading, however, if temporary shocks impact growth in one quarter but are unlikely to last all year – such as happened in the first quarter of 2020 at the outbreak of the covid pandemic, when growth plummeted.
A higher GDP result is generally positive for a nation’s currency as it reflects a growing economy, which is more likely to produce goods and services that can be exported, as well as attracting higher foreign investment. By the same token, when GDP falls it is usually negative for the currency. When an economy grows people tend to spend more, which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation with the side effect of attracting more capital inflows from global investors, thus helping the local currency appreciate.
When an economy grows and GDP is rising, people tend to spend more which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold versus placing the money in a cash deposit account. Therefore, a higher GDP growth rate is usually a bearish factor for Gold price.