With global and foreign exchange markets focusing strongly on United States protectionism, the Canadian dollar (CAD or loonie) and euro (EUR) are among the most impacted currencies, said Societe Generale.

U.S. President Donald Trump has targeted trade with Canada from the outset and the U.S. is now set to impose tariffs on eurozone steel and aluminum imports, wrote the bank in a note to clients. This backdrop should keep both the EUR and CAD under pressure in the coming months, helping keep EUR/CAD in its range since fall 2023.

CAD turbulence since the start of the year has pushed up EUR/CAD realized volatility, stated SocGen. However, the risk premium in implied volatilities persists, so the bank sees value in selling it by taking savvy risks.

Instead of selling gamma or naked options, SocGen prefers selling volumes via a double-no-touch (DNT) option, taking advantage of the spot range to generate attractive leverage.

A DNT option is a type of option that gives the holder a specified payout only if the underlying asset price remains within a specified range until expiration

The EUR/CAD foreign exchange rate has been trading within SocGen's DNT bounds since October 2023. The bank expects it to remain in this range for at least one more semester, as the FX market should remain US dollar-driven, with a strong focus on trade tensions and U.S. policies.

Investors buying a DNT option cannot lose more than the premium initially paid. However, the option will cease to exist if EUR/CAD hits either 1.4450 or 1.5250 at any time before expiry.