Diverging US-Canada Growth Outlook Weighs on Canadian Dollar Upside, SocGen Says

09:55 AM EDT, 10/21/2026 (MT Newswires) -- The IMF recently raised its growth outlook for advanced economies by 0.4 percentage point from July but lowered its forecasts for Canada to 1.1% in 2026 and 1.7% in 2027, compared with projected US growth of 2.5% and 2.1%, respectively, according to a note from Societe Generale Cross Asset Research. The widening economic growth divergence adds to the challenges facing the Canadian dollar, wrote SocGen's Chief Currency Strategist Kit Juckes in Wednesday's note. The gap in economic growth and the difference in two-year interest rates remain key factors driving the US dollar to Canadian dollar exchange rate, said Juckes. While higher US inflation could hurt export competitiveness over time, stronger US growth continues to support the US dollar. Over the past decade, USD/CAD has averaged CA$1.33, trading within a range of CA$1.20 to CA$1.45, he added. With much of Canada's weaker outlook already priced in, further gains in USD/CAD may be limited. A sustained Canadian dollar recovery, however, would likely depend on stronger domestic data, improved geopolitical conditions and a narrowing gap in economic growth and interest rates, potentially pushing USD/CAD below 1.35, according to SocGen.