The Canadian economy contracted less than expected at the start of this year as per data on Tuesday but much stronger US data and hawkish rhetoric by the policymakers there have been keeping the loonie close to the 6-year low touched earlier this month.
The Canadian GDP declined 0.1% month-on-month in January after the 0.3% expansion in December, while analysts had been expecting a reading of -0.2%.
The US consumer confidence index captured by the Conference Board has come in at 101.3 for March when analysts had been expecting 96.0 from the February print of 96.4.
USD/CAD jumped to 1.2785 on Tuesday from the previous close of 1.2675 before easing to 1.2731, which is still a 12-day low for the Canadian currency.
The loonie was down as much as 0.8% on the day ahead of the GDP data, adding to the 2.2% slide over the previous two sessions.
The USD/CAD pair had touched a high of 1.2825 on 13 March which was its highest since March 2009, and that peak is now not far away for a retest.
The S&P/Case-Shiller house price index has risen to 4.6% for January as per data on Tuesday from 4.5% in the previous month. Also, the redbook index for the 27 March week has risen to 1.2% from 1.1% a week ago.
The US central bank will have a "strong" case to hike interest rates in June, said Richmond Fed President Jeffrey Lacker on Tuesday, prompting the dollar bulls to push the USD index more than 1% higher on the day.
Lacker said consumer spending, the labor market and other economic conditions have improved significantly over the last year.
The USD index has risen to an 11-day high of 98.66 on Tuesday, up 1% so far this week and distancing further from the three-week low of 96.15 touched on 26 March.
Weak data from eurozone also helped the dollar rally on Tuesday. Italy's unemployment rate rose to 12.7% in February from 12.6% at the start of the year when the market had been expecting a drop to 12.5%. The jobless rate for the eurozone came in at 11.3% trailing consensus of 11.2% and compared to January's 11.4%.
The Chicago purchasing managers index has risen less than expected in March according to the data at 13:45 GMT. The index came in at 46.3, badly trailing the market consensus of 51.5, from 45.8 in February.
The expectations index increased from 90.0 last month to 96.0 in March. The present situation index, however, decreased from 112.1 in February to 109.1, Conference Board said.
Lynn Franco, director of economic indicators at the Conference Board, said: "This month's increase was driven by an improved short-term outlook for both employment and income prospects; consumers were less upbeat about business conditions."
"Consumers' assessment of current conditions declined for the second consecutive month, suggesting that growth may have softened in Q1, and doesn't appear to be gaining any significant momentum heading into the spring months," said Franco.