HIGHLIGHTS OF THE WEEK – July 27

United States

• The week started off on a positive note, with Greece and its creditors announcing early Monday morning that they had reached a tentative deal. The agreement will ultimately unlock an additional €86B over the next three years, along with a €7B bridge loan to help Greece cover near-term maturing debts.
• June retail sales disappointed, with the headline reading falling 0.3% m/m – well below the median consensus forecast of +0.3% m/m. Core retail sales were also weak, falling 0.1% m/m.
• Housing starts recorded a sizeable gain in June, rising to 1.17 million units. All of the strength was concentrated in the multifamily segment (+29.3% to 489k), while single-family (-0.9% to 685k) starts fell for the second consecutive month

Canada

• In a hotly debated decision, the Bank of Canada cut the overnight rate 25 basis points on Wednesday to 0.5%. The cut was not fully anticipated by markets. Consequently, the loonie fell to a new post-recession low of 77 U.S. cents and shorter-term bond yields also edged down after the announcement.
• The Bank downgraded its growth outlook significantly in its Monetary Policy Report, with real GDP expected to advance only 1.1% in 2015, in line with our own view. According to the Bank, the significant degree of economic slack that opened up in Canada’s economy over the first half of the year warranted additional monetary stimulus to keep underlying inflation from falling further below the Bank’s 2% target.
• TD is confident that a resurgent U.S. economy in the second half of the year will give many exporters a boost, aided by a weaker loonie. But, given our own downgraded forecast, the Bank of Canada will need to keep policy at the currently simulative settings until the middle of 2017.

For further information, please contact:

John Maveety Manager, Residential Mortgages – Greater Ottawa Area TD Canada Trust
T: (613) 371-1984 F: (888) 899-1984 P: (866) 767-5446 
John.Maveety@td.com