USD/CAD reverses its intraday gains on Friday as a softer US Dollar (USD) helps the Canadian Dollar (CAD) recover from weakness driven by softer-than-expected Gross Domestic Product (GDP) figures. At the time of writing, the pair trades around 1.3780 after rising to 1.3829 earlier in the American session.

On the geopolitical front, hopes for a potential US-Iran deal are reducing safe-haven demand for the US Dollar. The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, trims earlier gains on Friday and slips below the 99.00 mark.

Traders are awaiting final approval from US President Donald Trump on a proposed 60-day memorandum of understanding (MOU). The agreement would extend the current ceasefire and reopen the Strait of Hormuz.

Trump said on Friday that “the naval blockade will now be lifted” and added that he would be meeting in the Situation Room “to make a final determination” on Iran.

However, Iran has not yet confirmed or finalized the agreement, keeping some uncertainty in markets. Tehran also continues to say that shipping through the Strait of Hormuz is under its control, while the US insists the waterway must remain unrestricted.

On the data front, Canada’s economy contracted in the first quarter of the year on an annualized basis, marking the second consecutive quarterly decline. Statistics Canada reported that GDP contracted 0.1% in Q1, missing expectations for 1.5% growth. Two straight quarters of economic contraction is commonly seen as a technical recession.

On a monthly basis, GDP declined 0.1% in March after expanding 0.2% in February, missing market expectations for a flat reading.

Separately, The Wall Street Journal reported that the Trump administration is expected to propose changes to the US-Mexico-Canada Agreement (USMCA) that would require half of a vehicle’s components to be made in the United States.