On June 10, the Bank of Canada will hold its next meeting, and it is expected to maintain all monetary policy parameters. This is the basic and most anticipated scenario, and its implementation is already largely factored into current prices. Therefore, all attention from USD/CAD traders will be focused on the accompanying statement's rhetoric and comments from the central bank's head. The intrigue remains, as the central bank will need to strike a balance among signs of recession, a new wave of inflationary risks, and strong labor market data. Which way the scales will tip is an open question, making the June meeting far from a formality.
Looking at the W1 timeframe, we see that the USD/CAD pair has been in an upward trend for six consecutive weeks. This price dynamic is due not only to the overall strengthening of the American currency (amid a rise in risk-averse sentiment) but also to the weakness of the Canadian dollar, resulting from the slowing Canadian economy.
Let's recall that after revising Canada's GDP growth data for the fourth quarter of 2025, the statistics office reported a 1.0% decrease in the economy. In the first quarter of this year, the country's GDP also declined by 0.1% (against a forecast of 1.5% growth). Thus, after two quarters, the Canadian economy has entered a phase of technical recession.
However, the structure of this decline is much more important than the mere fact of two "negative" quarters. The most concerning aspect is the reduction in business investment. Corporate investments have been declining for five consecutive quarters, and in the first quarter of this year, they fell by an additional 0.7%. This is indeed a worrying signal, as investments determine future economic productivity. Government capital expenditures have also decreased by 2.5%, primarily due to reduced military spending.
Furthermore, the Canadian real estate market, which has long been a growth driver, has exhibited negative dynamics and has struggled to withstand a prolonged period of high interest rates. Declines have been recorded in both new construction and transaction costs, indicating reduced activity in the secondary market.
Consumer spending increased by 0.4%, which at first glance indicates a revival of consumer activity. However, this growth was achieved at the expense of reduced savings: the household savings rate has fallen to its lowest level in two years, at 3.5%. At the same time, expenses for servicing mortgages and other debts rose by 0.7%, indicating increased financial pressure on households. The growth of imports (by 2.9%) has also significantly slowed down the economy. Meanwhile, the total export volume decreased by 0.1% due to a reduction in car and light truck shipments (a consequence of the White House's tariff policy).
All this, as they say, is one side of the coin. On the other side are the "Canadian Nonfarms." The paradox is that while GDP is declining, the Canadian labor market is demonstrating remarkable resilience. In May, the economy created nearly 88,000 jobs (against a forecast of +10,000), while the unemployment rate dropped to 6.6% (against a forecast of 6.9%). Notably, the overall growth in employment was ensured exclusively by the full-time employment component, while the temporary job indicator showed negative dynamics. Additionally, GDP per capita grew by about 0.9% year-on-year, thanks to tightening immigration policies (population growth rates significantly slowed).
Given these conflicting signals, it can be assumed that the Bank of Canada will try to maintain balance in its rhetoric, delivering neutral messages that emphasize a wait-and-see position. Notably, the central bank representatives in their recent speeches have not dramatized the situation regarding the economic slowdown. In particular, Deputy Governor Carolyn Rogers recently stated that we should not draw far-reaching conclusions based solely on a formal definition of a technical recession, since preliminary data and leading indicators point to a recovery in activity already underway in the second quarter. Indeed, operational estimates of growth indicate that Canada's GDP increased by about 0.4% in April, suggesting that the economy may be emerging from the downturn.
Thus, "optimistic-wait-and-see" outcomes from the Bank of Canada's June meeting may support the Canadian dollar, especially against the backdrop of disappointing first-quarter GDP growth data. The realization of such a scenario will exert pressure on the pair, allowing USD/CAD sellers to push lower towards the two nearest support levels: 1.3900 (the Kijun-sen line on the four-hour chart) and 1.3870 (the lower Bollinger Bands line on the same timeframe).
