Weekly Importer / Exporter Analysis 10-19-15

13918264820_fe7d343d8d_o Pile of Yuan

It is really hard to find a suitable picture for a story about bonds.

Exporters sweep for the second week in a row.  This brief respite is counter to the long term trend.  While some people are whispering about an impending US recession (see below) the economy is still growing.

No progress on the Ex-IM Bank, with a vote to be held on October 26th.  Exporters, you should let your representative know how you feel on the issue.  We are talking about a program that makes money for the government and helps 1,000’s of small businesses.

A common fear being paraded by politicians of all stripes is that China will at some point sell their US bonds and cause pain in the bond markets.  The idea is that if China is not a net buyer, borrowing rates for the US will go up, disrupting banks and hurting the government budget. This very scenario has been playing out, with no problems.  Domestic demand for bonds has picked up the slack, preventing a rise in rates.  The downside of this domestic demand is that it bodes ill for the future, for when domestic markets prefer bonds, they feel that a recession is coming.

Other US economic data for this week is here.

Who won the battle last week, between the USD and five currencies?  The perspective is strictly from America, so if against the Aussie Dollar, United States importers won, that also means Australian exporters won as well.  I am changing the sign convention: negative percentage changes mean that exporters have the advantage while positive numbers show the advantage for importers.

Currency Week Ending 10-9-15 Weeks in a Row Weekly Change YTD Change
Australian Dollar (AUD) Exporters Win! 1 -0.8% 10.45%
Canadian Dollar (CAD) Exporters Win! 1 -1.0% 9.63%
Euro (EUR) Exporters Win! 1 -0.7% 5.97%
British Pound Sterling (GBP) Exporters Win! 1 -0.7% 0.69%
Japanese Yen (JPY) Exporters Win! 1 -0.3% -0.67%

Thanks,

Damon

PS- Photos from our friends at Lobster or Unsplash

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Weekly Importer / Exporter Analysis 10-13-15

distant goal

While it is hard to see to goal, we should be more concerned about what the haze is hiding.

Exporters sweep the week, as concerns about the global economy, especially China, causes chop in many markets.  As with previous spikes in favor of exporters, the fundamental trend is against them, and perhaps it might be a good moment to lock-in rates.  Talk of the Federal Reserve raising rates in March rather than December, also temporarily helps exporters.

Chaos in the House of Representatives may help the real economy.  With Speaker Boehner stepping down, the Republican party has gone into cannibal mode, chewing up and spitting out candidates.  Ironically, this frees Boehner to take care of business, starting with a real budget, passing a debt ceiling increase, and possibly funding the Ex-Im Bank.  If all three pass, both importers and exporters will benefit.  If the government stays open and services its debts, that is obviously a boon to everyone.  The Ex-Im Bank primarily finances export trade, making it less risky to take on international customers.  Let’s hope for the best.

I was at the SOCAP conference last week, meeting a lot of businesses, investors, and NGOs, dedicated to not only helping people, but doing it in a sustainable way.  I made over 30 connections and I look forward to helping them with foreign exchange and hooking them into my network.

Ben Bernanke was in Boston this morning, and I saw him give a talk about his new book (The Courage to Act) and about the economy in general.  Always useful to hear about the decisions made from the people that made them.

Other US economic data for this week is here.

Data below reflects 2 weeks.

Who won the battle last week, between the USD and five currencies?  The perspective is strictly from America, so if against the Aussie Dollar, United States importers won, that also means Australian exporters won as well.  I am changing the sign convention: negative percentage changes mean that exporters have the advantage while positive numbers show the advantage for importers.

Currency Week Ending 10-9-15 Weeks in a Row Weekly Change YTD Change
Australian Dollar (AUD) Exporters Win! 0 -3.2% 11.13%
Canadian Dollar (CAD) Exporters Win! 0 -2.3% 10.62%
Euro (EUR) Exporters Win! 0 -0.9% 6.64%
British Pound Sterling (GBP) Exporters Win! 0 -0.8% 1.46%
Japanese Yen (JPY) Exporters Win! 0 -0.2% 0.03%

Thanks,

Damon

PS- Photos from our friends at Lobster or Unsplash

Weekly Importer / Exporter Analysis 9-28-15

11371023676_7b397707eb_o rusty bulldozer

A rough outlook for Caterpillar?

Importers sweep, with exporters giving up all of their gains from last week.  This fits the trend of dollars gaining in value in anticipation of higher US interest rates combined with quantitative easing in Europe and Japan.

Caterpillar (CAT) is a case of a US exporter suffering from a perfect storm of conditions.  They focus on construction and energy equipment, which are subject to the ebbs and flows of commodity prices.  With commodities reaching new lows, orders for new mining equipment are expected to drop.   Interest rates are expected to rise in the US, and in response, globally.  This makes Caterpillar’s equipment more expensive to finance.  To add insult to injury, the US interest rate increase will continue to fuel the rise of the value of a dollar, making their equipment more expensive in local currencies.  As the dollar increases in value, this only depresses commodity and oil prices.  Likely, Caterpillar has sophisticated hedges to offset some of these factors.  The only “silver lining” is that any manufacturing inputs that are imported into the United States are becoming cheaper every day.

Caterpillar will survive because they have a diversified supply chain, a variety of products, and access to global markets.  These lessons can be applied to smaller importers and exporters.  If you import your products from a single country, consider identifying suppliers in other regions.  If you export your products to a single country, consider looking at new markets.  By having suppliers and customers located in multiple countries, you are in a position to take advantage of changes in foreign exchange market – or survive perfect storms.

Other US economic data for this week is here.

Who won the battle last week, between the USD and five currencies?  The perspective is strictly from America, so if against the Aussie Dollar, United States importers won, that also means Australian exporters won as well.  I am changing the sign convention: negative percentage changes mean that exporters have the advantage while positive numbers show the advantage for importers.

Currency Week Ending 9-25-15 Weeks in a Row Weekly Change YTD Change
Australian Dollar (AUD) Importers Win! 0 2.2% 14.30%
Canadian Dollar (CAD) Importers Win! 0 1.1% 12.91%
Euro (EUR) Importers Win! 0 1.9% 7.51%
British Pound Sterling (GBP) Importers Win! 0 2.2% 2.24%
Japanese Yen (JPY) Importers Win! 0 0.2% 0.31%

Thanks,

Damon

PS- Photos from our friends at Lobster or Unsplash

Weekly Importer / Exporter Analysis 9-21-15

7158973764_2d778695ea_o port

A storm is brewing for US exporters.

The Federal Reserve decided against raising short term interest rates.  While this is what the market expected, participants had to unwind hedges and other positions that would have benefited if rates were increased.  This has led to exporters sweeping the week.  Exporters may want to take stock and use this time to lock-in future prices, as all indications point to a rougher future.

Other US economic data for this week is here.

Who won the battle last week, between the USD and five currencies?  The perspective is strictly from America, so if against the Aussie Dollar, United States importers won, that also means Australian exporters won as well.  I am changing the sign convention: negative percentage changes mean that exporters have the advantage while positive numbers show the advantage for importers.

Currency Week Ending 9-18-15 Weeks in a Row Weekly Change YTD Change
Australian Dollar (AUD) Exporters Win! 1 -1.3% 12.10%
Canadian Dollar (CAD) Exporters Win! 0 -0.4% 11.83%
Euro (EUR) Exporters Win! 1 -1.1% 5.65%
British Pound Sterling (GBP) Exporters Win! 1 -0.8% 0.06%
Japanese Yen (JPY) Exporters Win! 0 -0.7% 0.15%

Thanks,

Damon

PS- Photos from our friends at Lobster or Unsplash

Weekly Importer / Exporter Analysis 9-16-15

Open Ocean

Is the rate change a drop in the bucket or the cause of a tsunami?

Most markets are choppy as the Federal Reserve mulls over whether or not to raise short term interest rates.  While the actual amount of the increase (if it happens) will be negligible, the psychological effect is more important.  With an increase one can expect the dollar to gain in value, benefiting importers and hurting exporters.  Interest rates will increase on variable rate loans and lines of credit.  It might be a good time to refinance if you have been holding out.  Globally, an increase will cause money to flow back toward the United States and away from emerging market economies.   The price of oil is expected to drop further.

While I can see the arguments for both sides, I would like to see an increase sooner rather than later.  The difference between now and three months is tiny, and if a 0.25% increase in interest rates could cause some sort of global crash, I think the Federal Reserve would be on top of that.

The big news from the Fed is scheduled for 2 pm tomorrow!

Other US economic data for this week is here.

Who won the battle last week, between the USD and five currencies?  The perspective is strictly from America, so if against the Aussie Dollar, United States importers won, that also means Australian exporters won as well.  I am changing the sign convention: negative percentage changes mean that exporters have the advantage while positive numbers show the advantage for importers.

Currency Week Ending 9-12-15 Weeks in a Row Weekly Change YTD Change
Australian Dollar (AUD) Exporters Win! 0 -0.6% 13.43%
Canadian Dollar (CAD) Importers Win! 3 0.3% 12.23%
Euro (EUR) Exporters Win! 0 -1.3% 6.74%
British Pound Sterling (GBP) Exporters Win! 0 -1.1% 0.89%
Japanese Yen (JPY) Importers Win! 0 0.4% 0.82%

Thanks,

Damon

PS- Photos from our friends at Lobster or Unsplash

The Federal Reserve, Interest Rates, and Importers: What to Expect

A container ship arriving in port on a very calm day.

It is time to load up.  Imports are going on sale.

The Federal Reserve is debating whether or not to raise a key short term interest rate, with the decision out on Thursday at 2 pm.  While the decision is dominating financial news, as an importer, there are clear ramifications either way.

If they raise rates

  1. The dollar will gain in value, benefiting importers.  However, if you pay in dollars, your international suppliers may not be passing this benefit on to you.  With your next invoice, ask them to send the total in both currencies.  You can then choose to pay the one that is better for you.  (Hint: look for savings in the local currency, we can help if you have a question).
  2. Variable rate loans and lines of credit will go up for everyone, globally.  If you have loans that you can refinance, it might make sense to roll them into fixed rate loans.  Whether or not this is the beginning of rate increases, they can only go up from here.
  3. Oil and other commodities will go down in cost.  So if you have oil or steel intensive products, your suppliers are getting a price break here.  Shipping prices should decrease.

If they do not raise rates:

  1. There might be a short lived reduction in the value of the dollar.  It is short lived since interest rates will rise in the not too distant future.
  2. Your variable rate loans and lines of credit are safe, for now.
  3. Oil and commodities are on a downward trend, regardless of interest rates.

The bottom line is that this is a great time to identify and source new international suppliers.  Your dollar will by more goods and it will be cheaper to get them here.  Take this opportunity to diversify your supply chain and / or cut costs.  We can help, feel free to contact us with any questions.

Best,

Damon

Weekly Importer / Exporter Analysis 9-8-15

iStock_000004144268_Small shipping container

Time to load up on imports?

Importers make large gains as fears of a Chinese economic sputter and a positive US jobs report make dollars more valuable.

Oil prices are choppy as the world remains oversupplied.

Other US economic data for this week is here.

Who won the battle last week, between the USD and five currencies?  The perspective is strictly from America, so if against the Aussie Dollar, United States importers won, that also means Australian exporters won as well.  I am changing the sign convention: negative percentage changes mean that exporters have the advantage while positive numbers show the advantage for importers.

Currency Week Ending 9-5-15 Weeks in a Row Weekly Change YTD Change
Australian Dollar (AUD) Importers Win! 2 1.8% 14.05%
Canadian Dollar (CAD) Importers Win! 2 0.1% 11.94%
Euro (EUR) Importers Win! 0 1.0% 8.04%
British Pound Sterling (GBP) Importers Win! 1 1.0% 2.06%
Japanese Yen (JPY) Exporters Win! 3 -0.4% 0.37%

Thanks,

Damon

PS- Photos from our friends at Lobster or Unsplash