A New Wave of Worries Undermines the Pound and the Euro

Investor risk appetite is expected to remain soft over the next few quarters, which will continue to bolster the US dollar. We’ll be keeping a particularly close eye on European currencies, especially if the risk of a deeper recession takes hold and if new political and financial tension emerges. We’re still forecasting a mild recession for Canada in our baseline scenario as the housing market correction continues. This will limit the potential for a rebound in the Canadian dollar over the coming months. We now expect the loonie to end the year at around US$0.72, or potentially lower if the economy deteriorates more than anticipated.