RBC expects massive downgrade of UK economy and volatility in U.S.
This is a massive downgrade from the previous projection for a 2.1 percent rise – and growth in its largest European trading partners is also forecasted to slow down.
Brexit repercussions should exert little pressure on Canada and the United States due to their proportionately smaller trade flows with the U.K.
U.S. real GDP growth averaged a meagre 1 percent in the first half of 2016, largely due to weakness in business fixed investment and inventories, while consumer spending ramped up.
Strong labour markets, accelerating wage growth and low financing rates should keep U.S. consumers spending.
Uncertainty about the U.S. presidential race in the near term may produce periods of volatility for the U.S. dollar, yet RBC maintains that the U.S. currency will post modest gains against the Euro, Canadian dollar and sterling as markets look for a U.S. Federal Reserve policy rate increase in the first half of 2017. ■