© David Tulk
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I think we will see a rebound from the May print but the pace of growth is likely to still remain quite subdued. At this point, what is really going on is that once the economy heals from the wildfires impact, what we will need to see is more evidence that growth in the non-energy sector is continuing. Therefore, that is really premised on the strength in the US economy as well as continued weakness in the currency; however, we are not convinced that we will see this scenario unfold.
Some analysts say that there is a bubble in the Canadian real estate market. Do you share this point of view or not? Why?
I think, certainly, there is a reason to think that some markets are very stretched. For example, we could look at the Vancouver market and the Toronto market, as these two are somewhat unique and looking like they need to potentially correct; however, speaking about the bubble, I think we have to figure it out what the catalyst for a reversal in the housing market trends is. On that front, I would say the most likely catalyst is higher interest rates, but that has not really happened yet. Accordingly, our feeling is that these markets could continue to expand, and obviously the further they go the bigger the risk is that they unwind dramatically if and when the interest rates move higher.
What will be the major drivers for the Loonie this year and what are your forecasts for EUR/CAD and USD/CAD for the same period?
Our thinking in terms what drives the Canadian Dollar generally is where commodities prices will unfold. At the moment, we do think that they will hold in close to their current levels. Another factor is also the risk that the Bank of Canada may have to come to play cutting interest rates again or the Federal Reserve potentially hikes at this point this year. So, for the end of the year our forecast for the EUR/CAD is 1.38 and we see the USD/CAD currency pair trading at 1.35.