Currency Markets Knowledge for Commercial Companies...
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Jan 2016 Currency Markets Knowledge for Commercial Companies, Maquiladoras, International Manufacturers CONFIDENTIAL: For Presentation Purposes Only
Transcript of Currency Markets Knowledge for Commercial Companies...
Jan2016
CurrencyMarketsKnowledgeforCommercialCompanies,Maquiladoras,
InternationalManufacturers
CONFIDENTIAL:ForPresentationPurposesOnly
• Leadingfullservicebrokerdealer–SEC&FINRA• Clientbasesmall&midcapcompanies,asset
manager,familyofficesandhighnetworthindividuals
• Teams–Fixedincome,equity,FX,research,structuredproductsandinvestmentbanking
• Approximately450Mtradeddaily
IntroductionToOdeon
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• FXspecialists• Spot,Forward&Options• ExchangeRate -Direct&Timing• Deliveryofalltradablecurrencies• Hedgingsolutions• Systems-streamlined,automatedsupporttechnology• DedicatedFXcontact• MarketInformation• Onlineplatform• Compliance
OdeonFXDesk
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• SimpleTechnicalAnalysis- Support&resistancelevelbasedonFib- ExponentialMovingAverage8day(EMA8)- AverageTrueRange(ATR)- Elliotwave
TechnicalAnalysis
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Agenda
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§ FXMarketsUpdate
§ FXMarketplace
§ FXVola2lity
§ FXProducts
§ FXConsidera2onsforMaquiladoras
§ Q&A
• SinceTrump’svictory,USDMXN+10%– TuesdaygavebackhalfUSD’spost-electionrallywhichhit14yearhighs.
• FedPolicy– WesawtheFedraiseratesinDec2016,theHawkishtoneoftheFed
minutesthatfollowedcaughtthemarketbysurprise,consequentlytheUSDhasralliedsignificantly.
• TeresaMay’sspeechviewedaspositiveforthepound(+3.1%).
• Commodities– WTIoilrange:Currentlytradingaround53USDabarrel.Higheroilprices
expectedthroughout2017.– GOLD:currentlytradingaround1210.– AUD,CAD,NOKmainbeneficiariesoffirmercommoditiesin2017.
CurrentMarketEnvironmentJan2017
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RecentMarketDrivers
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ManyanalystsbelievethatthefearshavebeensomewhatoverblownandultimatelytheMXNwillreversetrendoverthecomingmonths.
Marketevents
-Differencesineconomicgrowth,investmentprospects,monetarypolicy.-Rhetoric3-6mosTrump-relatedvs.13to19effec2velyonoilandEMweakness-USFedendsQEandraisesthebenchmarkinterestrateforfirst2mesince2006-Con2nua2onofFedhikesshouldweighonemergingcurrencies-StrengthinUSD,correc2veweaknessintheshort-term-Britains2llontrackforamessy,complicatedandprotractedexitfromtheEU-“Drama2c”movesofChineseyuan;restrainingouXlows,capitalcontrols
Jan18thFXMarketSnapshot
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TechnicalsEURUSDWehaveheldbelowthekey1.0740levels,whilewewouldallowforashorttermspiketo1.0780ideallyweholdbelow1.0740tokeeptheimmediatedownsidecallintact.Thenextmovedownto1.03ishwillbeadecentshorttermbaseforanotherbouncehigher.GBPUSD�Intheshorttermwecansee1.25sbeforeanotherpushdowntotest1.18level.Yesterdayshighat1.2418wasjustshortofwhereideallythismovehighwouldhavehit.Stilllookingsubstantiallylowerinthecomingweeksandmonths.USDCADNicemoveloweryesterday.Wethoughstillwouldliketoseeanothermoveto1.34inthecomingdays.Onceweclear1.34wecanthenlooksubstantiallylowerthisyear.Ourcallfor1.15in2017islookinggood.USDMXNThekeylevelis20.85.Wewouldneedtoseethisbrokentoconfirmthetopisin.Untilweseethisthenwecanstillexpectanotherspikehigherintothe22.50level.Below20.85expectahugedrop.Targetsthisyeararetheinthe14s.USDJPYThishasbeenthedrivingcross.LooktothisfordirectionontheUSD.Hugemovedownyesterday.Weneedtosee114.40brokenontheupsidetoseeabottominthispair.Oncethishappenswewilllooktoatestof1.20inthecomingweeks.
TodayonthedatafrontwehavetheallimportantCPIdatafromtheUS,theConsumerPriceIndexisagreatlookatthecurrentstateofinflationintheUS.LaterthismorningwehavetheBankofCanadaontapwiththeirlatestdecisiononinterestrates
• InsertchartUSD/MXN5Year
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EUR/USDlast60days
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EURUSD1YEAR
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GBP/USD1Year
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USD/CAD1Year
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USD/JPY1Year
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USD/MXN1Year
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EUR/MXN1Year
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CAD/MXN1Year
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JPY/MXN1Year
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FXMarketMassiveSize
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§ 24hourmarket:OpensSundayinNewZealandandclosesFridayinNewYork
§ Mostliquidmarketintheworld:VolumeexceedsallglobalequityandfixedincometransacDonscombinedonadailybasis
§ Commonlytradedcurrencies:EUR,USD,GBP,JPY,CHF,CNH,CAD,AUD
§ ForeignExchangeisan“Over-the-Counter”(OTC)market:PrivatenegoDaDonsbetweentwoparDes
§ VolaDlityaffectedbymanyfactors,including:InterestratedifferenDalsbetweencountries,Centralbankpolicy,PoliDcs,EconomicstaDsDcs
FXMarketplaceParticipants
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CurrencyBrokers
MutualFunds
HedgeFunds
CommercialCompanies
PensionFunds&Endowments
CentralBanks
CommercialBanks
Individuals
OdeonClearingPartners
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• Dailymarktomarket–dailynetcapital
• Quickturnaroundoffunds
OdeonSafety&Security
FXMarketplace-Volatility
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MulDplefactorsinfluenceexchangeratevolaDlity:
§ InterestratedifferenDalsbetweencountries
§ Technical&fundamentalanalysis
§ CentralBankpolicy(actualvs.expectaDon)
§ EconomicstaDsDcs
§ M&AtransacDons
§ PoliDcs,etc.
TranslationRisk:Translationofforeigncurrencydenominatedassets/liabilitiesintofinancialstatements.EconomicRisk:Competitiveadvantagesand/ordisadvantagesresultingfromexchangeratefluctuations.TransactionalRisk:Transactionsdenominatedinaforeigncurrencyaresettledatadifferentexchangeratethaninitiallyrecordedorbudgeted.
DifferentTypesofCross-BorderRisk
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FXProducts
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Forimmediatepaymentinonecurrencyinexchangeforanother,usuallytosendforeigncurrencypayablesorconvertforeignreceivables(simplewiretransacDonsorpayments)
ContractualagreementbetweentwocounterparDestoexchangeafixedamountofonecurrencyinexchangeforanothercurrencyonaspecificdateorrangeofdatesinthefuture
Simultaneousbuyingandsellingofthesamecurrencyforonedateagainstanotherfuturedate.
SpotTransaction
ForwardContract
CurrencySwap
FXConsiderationsforMaquiladoras
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§ BankTransfers=SignificantExchangeRateSlippage
§ Timingforeignpayables/receivablesmakesyourcompanyanaccidentalcurrencyspeculator… Hopeisnotastrategy.
§ Theol’“EverythingisdoneinUSD”– Leavesmarginsonthetable/invoicesmaycostlesspricedintheforeigncurrency– LeavesroomforcompeDtorstobeatpricing
§ HowmuchareforeignexchangetransacDonsactuallycosDng?
TypicalScenariosØ MeeDngpayrolleveryweekforMexicanplantinMexicanpesos(MXN).Ø SendingadividendinJPYtoparentcompanyinJapan.Ø CollecDngareceivableinCanadiandollars(CAD)fromclientinCanada.Ø PayingalegalbillinGBPforprotec2ngapatentintheUK.Ø AcquiringassetsofabankruptsupplierinSwitzerland(CHF).Ø BuyingsparepartsfromaGermancompanyinEUR.Ø SourcingfromChina,payingRMB.
ThankYou!
Q&A
