1. Economic and Financial Market Outlook: Low for Longer…For Even Longer
August 2016
Mazen Issa
Senior FX Strategist

2. China: Growth Expectations Marked Lower…

3. …But More than Meets the Eye When it Comes to China

4. Growth Spectrum Not Off to a Good Start…
WEAKER 2016
STRONGER 2016
China: Managing slower growth with unknown structural potholes

5. Growth Spectrum Not Off to a Good Start…
WEAKER 2016
STRONGER 2016
China: Managing slower growth with unknown structural potholes
Emerging Asia: Caught in China's grip

6. The Sun is Starting to Rise on the Eurozone…

7. …But Political Uncertainty Is Also on the Rise Since Brexit

8. The Problem With Brexit

9. Europe No Longer a Headwind, but Will Only Provide Minimal Support
Eurozone: Structural issues to restrain rebound
UK:
Recession bound
WEAKER 2016
STRONGER 2016
China: Managing slower growth with unknown structural potholes
Emerging Asia: Caught in China's grip

10. Are Some US Economic Headwinds Turning a Corner?

11. All the Familiar Fundamental Headwinds Continue to Heal

12. US Recovery Expected to Remain on Track Despite Global Turmoil
Eurozone: Structural issues to restrain rebound
WEAKER 2016
STRONGER 2016
China: Managing slower growth with unknown structural potholes
Emerging Asia: Caught in China's grip
United States: Fundamental healing with a bit more turbulence

13. Saudi Arabia Has Reshaped the Supply Landscape of Oil

14. Demand Remains Deficient & Supply is Abundant

15. Primary Hit to Canada is Through Business Investment

16. Currency is Serving as an Important Shock Absorber to the Economy

17. Non-Energy Exports Helping to Provide An Offset

18. However Link to the United States is Not As Close as Before

19. Even More Pressure on Domestic Demand to Carry the Load

20. Incomplete Offset to Energy Weakness Will Weigh on Canada
Canada: Competing growth impulses
Eurozone: Structural issues to restrain rebound
WEAKER 2016
STRONGER 2016
China: Managing slower growth with unknown structural potholes
Emerging Asia: Caught in China's grip
United States: Fundamental healing with a bit more turbulence

21. Taper Tantrum Experience Reinforced the Theme of Gradualism

22. Financial Market Implications for the Outlook
Even with 50bps of hikes expected from Federal Reserve in 2017, government bond yields are going to remain low by historical standards. Bank of Canada could cut if growth dynamics do not improve.
Demand and supply mismatch in the oil market implies renewed downside price pressure with a recovery anticipated in 2016H2. WTI to reach around $60/bbl by the end of 2016.

23. The Easy Part of the USD Rally Has Passed

24. The USD Looking More Like an Ageing Rather than a Raging Bull

25. ECB Policy Crowded Out Investors…

26. …and Has Encouraged a Reach for Yield in Regions Like CAD

27. Oil and Rates Still Important Drivers for CAD But May Become More Elusive

28. A Road Map to 2016
The recovery from a balance sheet recession always moves slower and takes longer than you expect
Confidence is key to avoid lurking vulnerabilities in a slow-growth environment:
Counterintuitive Federal Reserve response function
All other central banks biased to do more and deal with the consequences later
Untested economic theory will lead to more uncertainty and more market volatility

29. Mazen Issa
Senior FX Strategist
212– 827 – 7182