England has submitted a formal request to leave the European Union which was the result of the Brexit referendum last year. The referendum result shocked the markets and speculation about the negative economic impacts dominated the media headlines for months. Now that the official process of leaving the EU is about to begin, the actual effects of the move will begin to appear. The EU economy is finally starting to show sustainable improvement after years of poor performance but the growth trend may be slowed as the effects of the Brexit become reality.
The Canadian economy has been anemic for the past few years, mostly due to the collapse of oil prices in 2014. However, there have been a number of improving economic reports over the past year that lead many analysts to conclude that Canada’s economy is set to lead the G7 in growth. This may be a surprise to some as the media has focussed on the strength of the US economy but the US economy is almost at full speed already, as evidenced by the 4.7% unemployment rate which leaves very little room to improve much more. Tomorrow’s first quarter Canadian GDP growth announcement will likely be higher than expected as this trend of positive economic news continues.
Despite the positive future for the Canadian economy, the Bank of Canada is unlikely to increase interest rates until 2018. This will continue to stimulate the Canadian economy with low rates, and also keep downward pressure on the loonie for the remainder of the year. Although it is impossible to predict with any certainty, the loonie will likely fall closer to US$0.73 through the remainder of 2017 and start to recover in 2018.
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