September 2015 Newsletter


    In This Issue:

  • Fx Market Insights
  • Great Exchange Rates Save Money
  • The Canadian Dollar at a Glance
  • "Black Monday" and the Global Impact

Great Exchange Rates Save Money

Foreign Exchange Market Insights
Black Monday" and the Global Impact

China continues to be a major influence on global investor sentiment and financial markets. On August 24th, the People’s Bank of China cut the one year lending and deposit rates by 25 basis points, marking the fifth reduction since November 2014, along with lowering the reserve requirement ratio by 50 basis points for all banks. This resulted in a severe sell off in equities and commodities markets around the world, and would later be colloquially called “Black Monday”.

Although the downward trend began on August 18th with the DOW dropping 33 points, the momentum continued in the following days leading into a steep selloff on August 21st, falling 531 points (3.12%) on the day, and opened the following Monday, August 25th, 1000 points down. Followed by a day of volatility, the U.S. markets recovered 4% on the 27th. On August 24th, world stock markets were down dramatically, taking out all gains made in 2015 while oil hit a six year low. With this plunge, an estimated ten trillion dollars had been wiped of the books of global markets since June 3. Growing concerns about a slowing Chinese economy and widespread leverage in China have sparked bearish trends in virtually all commodity prices, with oil dropping almost 40% throughout July and August.

If you are in business these days, what is happening across the world can have just as real of an impact on your business as our own domestic economic issues. In fact, in today’s globally connected environment, when it comes to currency exchange fluctuations, global events are often the catalyst that can erode profits from Canadian businesses. Contact a trader at Olympia Trust to see what tools risk management are available for your business to reduce your foreign currency exposure.

Foreign Exchange Market Insights

Market Insights - September 2015 Recap

The Canadian Dollar at a Glance

The Canadian dollar was relatively flat in August, recovering from the late-month multi-year lows on the back of a remarkable 3 day, 30% rally in oil prices into month end. The domestic risk for the Canadian dollar remains primarily related to oil, with the added concern of the Bank of Canada’s interest rate decision on September 9th and the coming election in October.

From a global perspective, Canadian dollar risk remains susceptible to the broader turbulence that will likely arise as the Federal Reserve begins to raise interest rates, which they have implied could happen this year. On top of this, risk will be tied to the ongoing impact of the global turmoil sparking from China. The swift official intervention in securities markets coupled with an implied acceptance of a weaker Renminbi has hammered the global markets.

Persistent weakness in commodity prices and soft global demand remain hurdles for the Canadian dollar. Despite the economic contraction in the first half of the year, the labour market has continued to add jobs at a moderate pace. In terms of monetary policy, the bank of Canada’s primary focus remains tied to oil prices. Canadian dollar sentiment remains bearish with near term CAD weakness likely to result from the expectations of the Federal Reserve policy normalization on its way.