We also noted three major and related developments since the summer that have affected the outlook for the Canadian economy. First, the Canadian dollar has appreciated sharply. In the Report, we noted that while the dollar has been supported by firm commodity prices, and strong domestic demand, the magnitude of the recent appreciation appears to be stronger than historical experience would have suggested.
The second major development affecting  4  BIS Review 127/2007  the Canadian outlook is the weakening of prospects for the U.S. economy, and the third is a tightening of credit conditions. Despite these tighter credit conditions, the momentum of domestic demand in Canada is expected to remain strong.