USD/CAD: Further BoC tightening could lead to a gradual decline – SocGen
|Economists at Société Générale analyze USD/CAD outlook following Canadian June CPI data.
Bank of Canada has yet to cool core inflation
Canadian CPI slowed to 2.8% in June, falling more than the 3% consensus. However, the two metrics of core inflation followed by the Bank of Canada have been slower to fall, currently averaging 3.8%, 1 percentage point above headline inflation, which is pressured by base effects and lower energy prices.
This could prompt further BoC tightening and cause the US/Canada rates differential to head south, leading to a gradual decline in USD/CAD.
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