* C$ hits 1-1/2 week low of C$0.9590 vs US$, or $1.0428
* Bond prices extend gains across curve
* Canada May GDP unexpectedly falls
* US Q2 GDP rises up less than forecast (Updates with details, comments)
By Claire Sibonney
TORONTO, July 29 (Reuters) - The Canadian dollar tumbled to its lowest level in more than a week against the greenback on Friday morning, while bond prices marched higher after Canadian and U.S. economic growth data fell below market expectations.
The currency CAD=D4 fell as low as C$0.9590 versus the U.S. dollar, or $1.0428, from about C$0.9511, or $1.0514, immediately before the GDP data was released. It was the lowest level for the Canadian dollar since July 19.
Canada's gross domestic product unexpectedly fell by 0.3 percent in May, when the mining, oil and gas sectors battled bad weather and wildfires. Analysts had projected a 0.1 percent increase from April. [nN1E76S08I]
"I think it tends to overstate the weakness in the headline, but it certainly does speak to a second quarter that is shaping up to be fairly weak," said David Tulk, chief Canada macro strategist at TD Securities.
"We're also really nervous with what happened in the U.S. in terms of their really weak data print for GDP ... so I think this just gets painted with the same brush of fairly weak data as well as increased political risk that causes risk assets to retreat."
The U.S. economy grew at a meager 1.3 percent in the second and growth for the first quarter was revised sharply lower, data on Friday showed. [nCAT005481]
Figures that showed Canadian producer prices fell last month came in closer to consensus, and were largely ignored, Tulk said. [nN1E76S08P]
At 9:33 a.m. (1333 GMT), the Canadian dollar stood at C$0.9586 to the U.S. dollar, or $1.0432, down from Thursday's North American close at C$0.9516 to the U.S. dollar, or $1.0509.
Tulk said the GDP data further reduces the likelihood that the Bank of Canada will resume its rate-hike campaign in the fall. A Reuters poll conducted last week showed most of Canada's primary dealers expect the central bank to raise interest rates in September or October. [CA/POLL]
Overnight index swaps -- which trade based on expectations for the key central bank policy rate -- showed investors paring back bets on a rate hikes in September, October and December. [BOCWATCH]
Overall, markets were in a risk-off mood as debt jitters on both sides of the Atlantic drove edgy investors away from riskier assets, including global equities. The Canadian dollar had outperformed other majors going in the data, however, and has been seen recently as safe haven.
Canadian bond prices extended early gains, tracking U.S. Treasuries higher. [US/]
The two-year Canadian government bond CA2YT=RR rose 14 Canadian cents to yield 1.413 percent. The 10-year bond CA10YT=RR rallied 54 Canadian cents to yield 2.818 percent. (Reporting by Claire Sibonney; editing by Peter Galloway)