Several Currencies Have Bounced Back against the US Dollar, but Further Turbulence Is Expected

The markets may be overly optimistic right now. Even if some central banks downsize their interest rate hikes, the fight against inflation is far from over, and its effects on the economy remain highly uncertain. We foresee a short-lived contraction in Canada and the US and more headwinds in Europe. That means further turbulence in the months ahead, which should give the US dollar the upper hand against most currencies. We therefore expect the Canadian dollar to end the year around US$0.72 before losing a bit more ground in early 2023.