Cambridge Mercantile Group

Cambridge Mercantile Group

December 16, 2014 09:00 ET

Currency Shifts Set To Accelerate In 2015

Cambridge Mercantile Analysts Suggest Further Currency Turbulence Ahead as Economic Outcomes Diverge

TORONTO, ONTARIO--(Marketwired - Dec. 16, 2014) - Cambridge Mercantile Group, a global payment and risk management solution provider, expects foreign exchange upheaval to continue throughout 2015. The company's analysts are monitoring economic performance shifts, policy changes, and market conditions closely, and are anticipating a year in which the world's major trading blocs follow very different paths.

The United States is expected to remain the clear outperformer, with growth accelerating as businesses ramp up investment, employment numbers improve, and households begin to spend once more. This should help to anchor the global economy, with the country stepping into its historical 'consumer of last resort' role once more. However, the Federal Reserve's associated withdrawal of stimulus could inject volatility into the financial markets.

In contrast, the euro area remains structurally weak. Central bankers are almost certainly priming the printing presses, but political challenges are likely to constrain the scale, speed and shape of any stimulus program that is implemented. Weak domestic consumption and relatively robust exports may continue to generate external surpluses for the bloc, meaning that it could remain a net provider of global liquidity.

China's economy is likely to continue decelerating. Policymakers will struggle to reconcile twin objectives; stabilizing growth, while reducing financial system risk. Stimulus-by-stealth efforts are likely to increase, which suggests that two-way volatility in the renminbi, and in commodity markets more generally, will remain a feature of the landscape.

As China slows and global commodity output soars, prices are falling at a speed unseen since the financial crisis. While this is tremendously beneficial for consumers and the global economy as a whole, raw materials exporters like Russia and Brazil are struggling to stabilize finances. Geopolitical risk is likely to increase as this pressure translates into the policy realm.

Declining revenues are also taking a considerable toll on countries like Canada. "In the long term, lower energy prices may be positive for Canada, helping to alleviate the Dutch Disease that has long afflicted the economy. Growth differentials are beginning to narrow between East and West, and exports are beginning to rise. We also could see housing market risks shrink as consumers manage balance sheets more cautiously," said Scott Smith, Senior Market Analyst, Cambridge Mercantile Group. "The transition will be painful, however. As companies cut investment plans and reduce costs, the economy will suffer -- and the sell-off in the loonie is expected to continue."

Ultimately, the stage is set for further capital flow volatility. "As the post-crisis economic order collapses into disarray, currency markets will continue to see upheaval in the year ahead," said Karl Schamotta, Director, FX Research and Strategy, Cambridge Mercantile Group. "Businesses and other market participants should be prepared for rapid and unpredictable reversals, particularly as the tertiary effects of this year's implosion in commodity prices begin to impact fundamentals. Batten down the hatches, rough seas ahead."

About Cambridge Mercantile Group

Since its inception in 1992, Cambridge Mercantile Group has grown to become a leading provider of global payments and currency risk management solutions. With more than 14,000 clients worldwide, Cambridge is among the largest bank-independent providers of hedging and risk management products, powered by technologies widely regarded as industry leading. Cambridge delivers a superior level of service to clients through extensive knowledge of foreign exchange and award-winning operational capabilities, supported by an experienced trading, account management and consultative sales team. With offices strategically located across the globe, including North America, Europe and Australia, Cambridge facilitates the secure movement of over $23 billion annually. For more information, visit www.cambridgefx.com.

For more detailed analyses written by Cambridge Mercantile Group's own market analysts, sign up for our quarterly newsletter: http://www.cambridgefx.com/230/currency-insights.aspx

Forward Looking Statements

This news release may contain forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and Canadian securities law. The terms and phrases, "suggests", "recommend", "anticipates", "forecast", "may", "could" and similar terms and phrases are intended to identify these forward-looking statements. Forward-looking statements are based on estimates and assumptions made by Cambridge Mercantile Group in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors that Cambridge Mercantile Group believes are appropriate in the circumstances, including but not limited to general economic and financial market conditions and currency performance. There are several factors that could cause Cambridge Mercantile Group's actual currency rate/price predictions to differ materially from those expressed or implied by the forward-looking statements, including, without limitation: risks related to economic and political events; Cambridge Mercantile Group's reliance on the expertise of its personnel; and difficulties in forecasting changes in the financial market particularly over longer periods given the potential for rapid changes in market sentiment. These factors should be considered carefully, and readers should not place undue reliance on Cambridge Mercantile Group's forward-looking statements. Cambridge Mercantile Group has no intention and undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

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