• U.S. real GDP data revisions by the Bureau of Economic Analysis this past July 30 put a dent in our growth and monetary policy scenarios.
    • The data revisions, which showed the U.S. economy running at an even lower capacity utilization rate than initially reported, converged with a soft job market to leave the financial markets feeling disenchanted about the possibility of an imminent interest rate hike in the United States.
    • The euro should not trend up in any sustainable fashion over the medium term. However, if macroeconomic policy in the United States takes a more stimulative turn, the greenback is likely to depreciate to some extent. This is why we believe the European currency will in the short term climb a little above its present level without, however, gaining any undue momentum.
    • Moreover, if the Fed sticks with its extremely accommodative monetary policy, a quick flurry of interest rate hikes this side of the border could launch the loonie into orbit. The Bank of Canada will therefore likely adopt a “stop and go” strategy.
    • Against this backdrop, we still see the loonie attaining parity with the greenback, only now at a slightly later date and at a somewhat slower pace.