With inflation gradually heading lower we believe Bank of Canada rate hikes are done, and that rates cuts could begin in Q2-2024, ahead of the Federal Reserve.

As Canadian growth remains subdued and in the absence of further BoC tightening, we also see potential for further Canadian Dollar weakness. 

The USD/CAD exchange rate has already reached our medium-term target of 1.3700, but a further move closer to 1.4000 over the next several months cannot be ruled out.