Canada's economy appears to have lost some momentum in recent months. Subsequently, economists at Wells Fargo also expect the Loonie to weaken over the coming months.

USD/CAD seen at 1.35 by Q1-2024

“We believe a contracting Canadian economy and an end to Bank of Canada tightening could contribute to some underperformance by the Canadian Dollar over the short-to-medium term.”

“We see the possibility for some weakness in the Loonie through Q1-2023, and see only a moderate rebound in the CAD over time.”

“Even acknowledging that risks are tilted toward less CAD softness than our base case forecast projects (which targets a USD/CAD exchange rate of 1.35 by Q1-2024), we still expect the Loonie to be an underperformer among the G10 currencies over the medium-term.”