Citi Global FX Strategy: Short USDCAD
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Citi's global FX strategy team recommended shorting USDCAD on September 2, 2026—entry 1.3854, target 1.35, stop 1.3990—on the view that the US-Canada relative rate spread is overstretched and should correct in the loonie's favor on upcoming catalysts. On the dollar leg, Citi sees no support for a hike from data before the September FOMC; September 11 US CPI is the key catalyst, with Citi's economics team forecasting year-on-year inflation easing to 2.3-2.4%, and the latest Fed minutes showing most participants expect inflation to decline gradually through year-end. The Canadian dollar leg is also a tailwind: the Bank of Canada sounded more hawkish than expected the same day, with Governor Macklem noting increased upside inflation risks, readiness to hike in consecutive meetings if needed, and downplaying tariff-driven growth impacts. With Fed-BoC December pricing at the top of its year-to-date range, Citi is fading the move. To neutralize oil beta, Citi holds long NOKSEK (spot reference 1.0335) as a geopolitical hedge while wagering hawkish-Fed premium fades. Open options positions as of September 2 include long NOKSEK (4-month 1.03/1.05 call spread expiring December 23, 2026; total P&L +0.10%) and short EURUSD (9-month 1.14/1.10 put spread expiring October 2, 2026; total P&L -0.35%).