The Canadian dollar is the top-performing currency ahead of the weekend.
It was reported Friday that Canadian GDP grew 2.6% y/y on an annualised basis, smashing expectations for a more pedestrian 0.5% growth.
The data put to bed any residual hopes of further interest rate cuts at the Bank of Canada, boosting Canadian bond yields and the domestic currency.
Markets weren't expecting any fireworks from the data release meaning currency traders were not adequately positioned for the scale of the surprise, which is why we have seen such a strong reaction:
The pound to Canadian dollar exchange rate (GBP/CAD) has fallen sharply and now nurses a daily loss of 0.56% having reached 1.8468. The euro to Canadian dollar pairing is down 0.54% at 1.6177.
USD/CAD has finally broken below the crucial 1.40 technical support level to trade at 1.3969.
"The monthly data showed a healthy end to Q3, with September GDP rising by 0.2% as we expected," says Katherine Judge, an economist at CIBC.
"Overall, a very noisy report due to large swings on the trade side, but this cements the on hold story for the BoC in December," she adds.
The Canadian dollar has struggled for much of 2025, owing to Canada's unique U.S. trade vulnerabilities, which have slowed the economy and prompted the Bank of Canada to slash rates.
Nathan Janzen, an economist at Royal Bank of Canada, says the subcomponents of the GDP data showed further signs of stabilisation in heavily trade-exposed sectors.
"Targeted U.S. tariffs continue to impact specific sectors and products (vehicles, steel and aluminium, copper, and lumber among others.) But most Canadian exports - 86% at last count in August - have continued to cross the U.S. border duty-free," he says.
RBC does not expect further interest rate reductions from the central bank as a base case.
With the trade outlook settling and the Bank having ended the cutting cycle, the CAD's outlook is turning more bullish, and the strength seen in the wake of this data print underpins the sense that it stands to perform well into year-end and early 2026.