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Global currency trends and forecasts
John Min, PhD
Chief Economist US
March, 2015
Opening notes Disclaimer
1. Performance
This document is for information and educational purposes only and should not be construed as guidance as to potential market movements or associated future returns. The World First USA, Inc (the ‘Company’) gives no guarantee as to the correctness or completeness of any scenario analysis or performance estimates contained herein. THESE SCENARIOS SHOULD NOT BE USED TO PREDICT FUTURE RETURNS. The Company will not be liable for any loss as a result of reliance on information contained in this document.
2. Advice and Opinion
Investing in any hedging strategies involve a certain amount of risk. Please ensure that you fully understand the risks involved before investing in any strategies contained herein. If you are unsure about the risks involved please seek independent advice from your financial advisor. This document contains opinions and estimates and should not be construed as advice. These opinions and estimates are subject to change without any obligation on the Company to notify you.
The Company makes no representations as to the sustainability of any products.
The Company is not accountable for any information derived from 3rd party sources.
3. Miscellaneous
Scenario or performance estimates contained herein are subject to change without notice. The research contained herein are subject to a change without notice. The research contained herein has been generated by employees of the Company, and is a true reflection of their views and opinions. Any sales annotations however, should not be considered objective or independent of the interests of the trading and distribution desks concerned.
FX market
• $5.4 trillion dollars per day
– Expect to grow more
FX market
• $4.6 trillion USD market
– Expect to grow more
Source: Bank for International Settlement
FX market
• Interconnected (real-time) markets
– Pick up in volatility by 2X
Volatility
• US dollar
– 25% rally vs. majors since July
Volatility
• Euro
– 27% decline vs. USD since July
Volatility
• Canadian dollar
– 19% decline vs. USD since July
Volatility
• Mexico peso
– 18% decline vs. USD since July
Volatility
• Chinese yuan
– 2% decline vs. USD since July
Volatility
• Budget headache
Volatility
• Numerous factors
– Complex
Volatility
• Key factors
– Economic conditions (e.g. GDP, inflation…)
– Government policies (e.g. monetary, fiscal…)
– International crisis (e.g. Ukraine, Greece…)
EURUSD
• Under pressure
– Poor fundamentals
• Anemic growth
• Disinflation
– ECB’s QE until 2016
– Greece bailout
USDCAD
• Commodity drag
– Falling exports
• Global slowdown
• Low commodity prices
• Record household debt
– BOC ready to cut again
– Oil shock
USDMXN
• Near historical low but…
– Growth pick up
• Lower inflation
• Falling unemployment
• High current account deficit
– BOM is selling USD
• $52M/day injection
– Legislative election in June
USDCNY
• Stable for now
– Slow growth
• Credit bubble
• Transition to service
– PBOC intervention
– Neighborhood tension
USD Index
• Stronger dollar 2015+
– FX relativity
USD Index
• Super cycles
Fair value
• Strong dollar 2015 – Overvalued
Industry
• Trade model
Architectural woodwork
• 2015 trade forecast (NAICS6: 337212)
– Real market +3.8% (vs. 4.3% 2014)
• Imports +9.4% (vs. 5.3% 2014)
• Exports +0.7% (vs. 5.0% 2014)
Reconstituted wood
• 2015 trade forecast (NAICS6: 337219)
– Real market +3.0% (vs. 3.1% 2014)
• Imports +1.6% (vs. 4.6% 2014)
• Exports -6.8% (vs. 1.5% 2014)
Navigation
• Mitigate 2015 FX risk
Guide
• Pay attention
– Don’t overlook!
Guide
• Get competitive rates
– No one-price rule in FX… (up to 5% difference)
Guide
• Time your payments – if you can
– So many reports & events
Guide
• Time your payments – if you can
– Don’t fight the currency waves
Guide
• Manage risk
– Consider forwards to protect your budget/margin
Guide
• Summary
– FX market is large and volatile
– Most analysts expect USD to be stronger 2015
– Manage risks
• Get competitive rates
• Pay attention
• Time transactions
• Consider forwards
– Navigate
• Have a great year!
John Min, PhD
Chief Economist
Direct: 571.447.4907
Contact information
