Weekly Importer / Exporter Analysis 7-27-15

2730279467_0a5329de86_o (2) oil

Oil prices affecting a currency near you.

Prices have been choppy as the post-Greek bailout is being weighed by markets.  As US interest rates rise expect importers to benefit as other governments do not have the scope to match increases.

China released some economic data that has markets disturbed.  In China, stock markets tumbled 8% today on news that manufacturing is shrinking.  How does this affect currency? The cause and effect are contested, but, at least recently, the value of a dollar and the price of oil move inversely.   So when dollars increase in value, the price of oil goes down.  This makes sense intuitively, since oil is priced in dollars and foreign producers have costs in other currencies.  What happens when demand causes a decrease in the price of oil?  Some people expect that the dollar will strengthen, but not because of the price drop, but because it makes the US economy more competitive, and thus dollars more valuable.  The manufacturing news in China will put downward pressure on global oil prices, which reduces gasoline prices here, which puts more money in US consumers pockets, and spurs economic growth.  Or so the theory goes.  If correct, that is another factor that bodes well for US importers and ill for exporters.

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 7-24-15 Weeks in a Row Weekly Change YTD Change
Australian Dollar (AUD) Importers Win! 4 0.6% 10.06%
Canadian Dollar (CAD) Importers Win! 4 0.3% 10.78%
Euro (EUR) Exporters Win! 0 -0.8% 9.11%
British Pound Sterling (GBP) Importers Win! 0 0.5% 0.37%
Japanese Yen (JPY) Exporters Win! 0 -0.2% 3.33%

Thanks,

Damon

PS- Photos from our friends at Lobster or Unsplash

Weekly Importer / Exporter Analysis 7-20-15

Euro Sign 4737133918_4642d16113_o (2)

Not surprisingly, importers gained against most currencies last week.  Even though there was a Greek debt deal, future US interest rate increases will continue to benefit US importers and hinder US exporters.

The Greek debt crisis has been partially resolved.  Greek banks opened today to a relieved public.  The cost of the deal to Greece and Europe has yet to be fully accounted, but it is certain that if Greece had just maintained the previous program, they would have been way better off.  By waiting to the last minute for Germany to call their bluff, they did real damage to their banks.  These banks will continue to be hobbled for years, restricting lending to small businesses, and thus hurting growth.  Everyone knows that the crisis is not really over, there will be a debt haircut at some point in the future.  Hopefully Greece can get their act together and really implement changes, not to pay back European debts, but to actually grow a real economy for their people.

The Iranian nuclear deal looks like it will be implemented.  Economic interests are already lining up.  Germany sent their Economic Minister to Iran yesterday, a mere four days after the deal was agreed to.   The delegation seeks to reopen severed trade ties.  Germany gave up half (~$2 billion) of their Iranian trade to enforce sanctions and both economies can use the boost.  It is rumored that even McDonald’s has filed an application to setup shop in Tehran.  Hopefully renewed trade will keep Iranian nuclear ambitions in check.

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 7-17-15 Weeks in a Row Weekly Change YTD Change
Australian Dollar (AUD) Importers Win! 3 0.5% 9.35%
Canadian Dollar (CAD) Importers Win! 3 1.8% 10.42%
Euro (EUR) Importers Win! 3 1.4% 9.95%
British Pound Sterling (GBP) Exporters Win! 0 -1.5% -0.21%
Japanese Yen (JPY) Importers Win! 0 2.0% 3.56%

Thanks,

Damon

PS- Photos from our friends at Lobster or Unsplash

US Regulators Cutting People Off from Banking System

I love Africa, except if you want to use dollars or access international trade

I love Africa, except if you want to use dollars or access international trade

It is becoming more and more difficult for legitimate businesses and people to remit funds to emerging markets.  This is due to a banking system that is becoming so risk averse that they close the accounts of entire sets of customers due to the cost of compliance with anti-money laundering rules.  Closing access to banks only pushes these customers to higher cost and less regulated solutions, hurting financial inclusion.  It also makes the cost to compete with established players nearly impossible to overcome, stifling innovation.  Staci Warden, executive director of the Center for Financial Markets at the Milken Institute, outlines these arguments in the attached white paper, Casualties of War: The unintended consequences of America’s financial weapon of mass destruction.

Weekly Importer / Exporter Analysis 7-13-15

The ship has sailed, leaving Greece in tatters

The ship has sailed, leaving Greece in tatters

With the exception of the Yen, importers sweep the week.  Given the Greek debt crisis and Janet Yellen’s announcement that US interest rates should rise in 2015, the trend for exchange rates to help US importers continues.

Greek politicians provided an example of the worst possible negotiation strategy, ever.  They took an economy that was growing (albeit slowly) and terrible austerity measures and traded for recession and the worst possible austerity measures.  After claims that sovereignty trumps international deals, the Greek government hopes to impose a deal that was explicitly rejected by the people in a referendum last week.  It is still possible that the parliament will not pass the necessary changes tomorrow, which would cap a string of votes that defied the person that called them.  This farce has become a blame transfer game.  European leaders did not want to be responsible for Greece leaving the European Union but they also did not want to actually help Greek citizens.  They formulated a plan that they hope would ultimately be rejected by Greece, so that the Greek parliament could take the blame.  They may get their wish tomorrow.

An Iranian nuclear deal has been announced.  This has potentially good effects for the global economy, depending on where you live.  For Iranians, the lifting of sanctions means eventual access to the banking system, international investment, and lifting of trade embargoes leading to economic growth.  For the United States, it means lower oil prices and potential opportunities for business expansion.  For oil producing countries, especially Russia, this is terrible news as a drop in oil prices directly hurts their economies.  While the deal is subject to US congressional approval, it seems that it is a positive development.

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 7-10-15 Weeks in a Row Weekly Change YTD Change
Australian Dollar (AUD) Importers Win! 2 2.2% 8.80%
Canadian Dollar (CAD) Importers Win! 2 1.2% 8.60%
Euro (EUR) Importers Win! 2 0.2% 8.49%
British Pound Sterling (GBP) Importers Win! 2 1.5% 1.34%
Japanese Yen (JPY) Exporters Win! 1 -1.1% 1.51%

Thanks,

Damon

PS- Photos from our friends at Lobster or Unsplash

Weekly Importer / Exporter Analysis 7-6-15

Pine needles

The new Greek currency? Fits in your pocket and high in fiber!

Importers nearly sweep the week as the Greek debt crisis causes people to hold onto dollars.  The Greek government has until Sunday to work out a deal or the European Central Bank will stop providing liquidity.  I find it hard to believe that a deal will be done by Sunday given that nothing has really changed.  Expect new drachmas to begin printing on Monday, with economic stress in the region and somewhat globally.  A terrible end for the Greek people as they substitute one version of austerity for a worse one.

The US jobs report was released last week, overshadowed by other events.  A strong showing 223,000 new jobs continued the positive trend.

Problems with the NYSE and a huge (>30%) drop in Chinese stock markets may spill over into currency markets, expect a volatile next few weeks.

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 7-3-15 Weeks in a Row Weekly Change YTD Change
Australian Dollar (AUD) Importers Win! 1 1.2% 6.66%
Canadian Dollar (CAD) Importers Win! 1 1.6% 7.40%
Euro (EUR) Importers Win! 1 1.0% 8.30%
British Pound Sterling (GBP) Importers Win! 1 0.8% -0.19%
Japanese Yen (JPY) Exporters Win! 0 -0.6% 2.64%

Thanks,

Damon

PS- Photos from our friends at Lobster or Unsplash

Weekly Importer / Exporter Analysis 6-29-15

Jumping Off Cliff

Greek government takes a leap into the unknown

Importers sweep the week, wiping out exporter’s gains from last week.  With the Greek debt crisis now real, there is a flight to safety in play which means the dollar is increasing in value.  This week will see some volatility as markets try to make sense of what is happening.  A pointless referendum on July 5th will make it clear if Greece wants to stay in the European Union, but it might not matter even if they vote yes.  The referendum is strictly a ploy for Alexis Tsipras to shift responsibility from himself to others and keep his power in the now bankrupt country.  If it we about “the people” he could have had this referendum earlier in the month and still had time to stave off default.  Greece is going to be hurting for years as the bank “holiday” becomes normal operating procedure and the EU gives them the boot.  Such a sad and needlessly wasteful exercise.

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 6-26-15 Weeks in a Row Weekly Change YTD Change
Australian Dollar (AUD) Importers Win! 0 0.7% 5.46%
Canadian Dollar (CAD) Importers Win! 0 0.9% 5.8%
Euro (EUR) Importers Win! 0 1.4% 7.32%
British Pound Sterling (GBP) Importers Win! 0 0.8% -1.08%
Japanese Yen (JPY) Importers Win! 0 0.5% 3.10%

Thanks,

Damon

PS- Photos from our friends at Lobster or Unsplash

JP Morgan Buys Greece Over Weekend

$2 Greece

In secret negotiations over the weekend, JP Morgan Chase purchased Greece for $2 per share.  On Sunday night, Jamie Dimon has a conference call with Eurozone finance ministers to alert them of the deal and allay concerns about doing business with Greece.

“JPMorgan Chase stands behind Greece,” Mr. Dimon said in a statement. “Greece’s clients and counterparties should feel secure that JPMorgan is guaranteeing Greece’s counterparty risk. We welcome their clients, counterparties and employees to our firm, and we are glad to be their partner.”

Greek citizens were rightfully concerned about the deal, and some openly stated that they would withhold their shares.  “I’ve got to think we can get more in a liquidation, I’m not selling my shares, this price is dramatically less than the book value Alexsis Tsipras  told us the country is worth,” said a midlevel Greek citizen. “The Parthenon is worth $8 a share.”

Though the selling of a country is rare, it is not unprecedented.  The United States was soon auctioned off to unnamed corporations and wealthy individuals for $576 million after the Citizens United case in 2010.

Thanks to Robin Sidel, Dennis K. Berman, and Kate Kelly of the WSJ and Andrew Sorkin of the NYT.