Trade Archives - Record Currency Macro

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Terminating NAFTA: What would the impact on Canada be?

29th January 2018/0 Comments/in Macroeconomics /by Joe Spearing

• As NAFTA negotiations become increasingly fraught, the risk of a complete termination by US President Donald Trump is increasing
• The long-run impact of such a termination is likely to be limited, based on the MFN tariffs the US could apply
• The most likely impact would be in terms of the real economy, as the shock generated would hit consumption, spook investment and delay the Bank of Canada’s hiking cycle.
• To investigate the magnitude of this effect, we model the impact on real economic variables and interpret the impact on the Canadian dollar. Our results suggest that a 6% depreciation of the Canadian dollar against the US dollar could be justified.

How far can the Euro go?

6th November 2017/0 Comments/in Eurozone /by Joe Spearing

• The euro has been very strong this year (appreciating over 10% YtD against the dollar)
• Fair value (measured using PPP) is 1.33, suggesting the EURUSD pair is still around 15% undervalued
• In this blog post we use a FEER (Fundamental Equilibrium Exchange Rate) framework to investigate what level exchange rate is consistent with a sustainable balance of payments. Our results are broadly consistent with PPP valuations, and suggest that there is a risk of further euro appreciation to come

Turkey’s Current Account: rebalancing at last?

17th January 2017/0 Comments/in Emerging Markets /by Joe Spearing

• 11th January saw data on Turkey’s November current account released
• The drop off in the trade balance can be largely explained by FX effects and continued decline in Tourism revenues
• A careful analysis suggests that in the detail might be some much-needed good news for Turkey

Turkey after the coup: three things to watch out for

30th August 2016/0 Comments/in Emerging Markets /by Joe Spearing

Following the attempted coup in Turkey on 15th July, we examine afresh the pressure points in the Turkish economy, and note three themes investors will be watching with interest.

Market Volatility: the Brexit Premium

27th April 2016/0 Comments/in UK /by Joe Spearing

The uncertainty associated with the outcome of the referendum on Britain’s EU membership is already affecting financial markets and the wider economy. By examining the pricing of derivatives, we can identify the price the market is putting on this uncertainty, and what movements in currency are expected between now and the referendum itself.

How tight is the Copper market? Implications for Chile

5th February 2016/0 Comments/in Commodities /by Joe Spearing

• The recent uptick of Chinese demand for copper and low levels of warehouse stocks give a misleading picture of the state of the copper market.
• Taking a broader view of stocks, we suggest that there is a substantial amount of “missing copper”, large portions of which are held by the Chinese State reserve Bureau (SRB).
• The policy of the latter in 2016 is therefore key to the performance of copper.

Japan’s Current Account: Out of the Red, Safely into the Black?

3rd November 2015/0 Comments/in Japan /by Andrew Bloomfield, CFA

• A combination of lower oil prices and the weak Yen have both helped restore the trade balance to health but a naïve scenario analysis suggests the trade balance is still subject to uncertainty from energy price and exchange rate dynamics.
• Worries may eventually shift from energy issues to saving rates – a shift in corporate saving behaviour, which has in the past shielded Japan’s external balance from declining household saving rates could have repercussions for the current account.