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Canadian dollar rebound stalls as tariffs weigh, Societe Generale says
Societe Generale points to a failure to reclaim the 50-day moving average near 1.3991, with new 50% tariffs on $20 billion of Canadian goods complicating the outlook.
Societe Generale strategists said the Canadian dollar’s rebound against the US dollar has stalled after softer June inflation in Canada slowed expectations of further downside in the CAD. The move was described as a partial rebound from around 1.4250 toward the 1.40 area, but the currency has not been able to reclaim the 50-day moving average near 1.3991.
The firm linked technical and macro pressures to the lack of follow-through, citing a market environment where new US tariffs on Canadian goods complicate a mean-reversion trade. It said technical levels around 1.3970 and 1.3870 to 1.3850 define downside, while 1.4150 to 1.4175 is seen as interim resistance.
Societe Generale also referenced Canadian inflation details, saying headline CPI slowed to 2.8% year over year in June and core inflation dipped to 1.8%, the lowest since December 2020. It added that, for the Bank of Canada, the data should reassure that spillovers to supply chains and non-energy goods are contained.
On policy and market expectations, the strategists said money markets currently price just 18 basis points of tightening in six months. They added that the 2-year US Treasury to GCAN spread widened by 6 basis points to 136 basis points, after having tightened previously from 142 basis points.