Economists at Wells Fargo expect only modest gains in the Canadian Dollar against the US currency over time.
BoC could be among the first of the major central banks to begin easing monetary policy
We expect only modest gains in the CAD against the US currency over time. While growth was resilient in early 2023, an overall slowing inflation trend means we believe the Bank of Canada has already ended its tightening cycle.
Should growth and inflation slow further as we expect, Canada could also be among the first of the major central banks to begin easing monetary policy, by Q1-2024. That should act as a headwind for the Canadian dollar, while energy prices that are well below their peaks should also be a restraining factor for the currency.
Against this backdrop, we expect the Canadian Dollar to underperform relative to most of its G10 peers over the medium term.