Report: U.S., Canadian economies diverging

TORONTO, Oct. 15 (UPI) -- Canada's economy will surge past the U.S. economy and the Canadian dollar will reach $1.05 against the greenback, a bank economic forecast predicted Monday.

"The loonie's flight is far from over," CIBC World Markets Chief Economist Jeff Rubin wrote, predicting the Canadian dollar will climb to a 5 percent premium against the U.S. dollar by the end of 2008.

The tables have turned between the U.S. and Canadian economies on several economic fronts, the forecast found.

Canadian real gross domestic product growth is outpacing that of the United States; U.S. housing prices continue to fall on mounting foreclosures while Canadian housing prices rise due to a surging economy; and the resource-based Toronto Stock Exchange "is set to outperform" the Standard & Poor's 500 for the fourth straight year, Rubin wrote.

In addition, "Canadians are getting richer compared to their American neighbors, after having fallen so far behind during the IT-driven economy of the 1990s," Rubin's report said.

A much stronger Canadian economy will in turn translate into "divergent monetary policies in the two countries," with the U.S. Federal Reserve Board cutting interest rates another 0.5 percent "while the Bank of Canada remains on the sidelines," the report said.