With markets almost fully priced for another quarter point BoC hike this year, and not placing high enough odds on cuts next year, a recalibration will see the Loonie end 2023 weaker, with USD/CAD likely reaching 1.39 by then.

As the market shifts to account for what we see as a higher likelihood of Fed cuts next year, that will weigh on the broad USD in 2024, supporting the Loonie in the process, with USD/CAD likely ending 2024 at 1.31.