Scotia Economics - Global Forecast Update

Scotia Economics has released its Global Forecast Update and hear are some key highlights:

1. Economic growth to remain positive, but the pace of expansion has been tempered;

2. The outlook for the Bank of Canada remains intact – a steady pace of rate hikes should take overnight rates to 1.5% by year end (from 0.5% currently) and 2.25% by year end 2011;

3. The U.S. rate hikes are now not expected until the Q2/2011;

4. Scotia Economics is now forecasting a much flatter yield curve over the next 12 months, with the forecast now indicating much lower longer term yields than previously expected. This creates a more neutral outlook for bond returns, which in turn means you should no longer sit in cash but instead start to extend term;

5. The outlook for the Canadian dollar remains positive, with the loonie expected to appreciate above parity over the next 12-18 months. The outlook for the Australian dollar is similarly positive versus the U.S. dollar, but fairly neutral versus the Canadian dollar – on average the Australian dollar is expected to trade around the 0.90 level versus the Canadian dollar (versus the current level of 0.91). Hence, with 4%+ in incremental yield, the Australian dollar looks attractive, although look to add positions when the AUD/CAD cross is at or below 0.90.

If you'd like a copy of the report, ask us at yourlifeyourplan.ca or call (250) 878-7372.

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