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Global Financial Outlook

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Global Financial Outlook

Foreign Exchange - July 2016


June markets were dominated by two events – US Non-Farm Payrolls and the United Kingdom Brexit vote. Market participants had assumed that a strong NFP number would compel the US Fed to increase the Fed Funds rate by 25 basis points as early as June, but when the data point proved disappointing that narrative changed. As a result, the US Dollar weakened against most currencies
in the aftermath.

With the Fed seemingly out of the calculation, attention then turned to the widely-watched UK referendum vote on EU membership. Despite very split polls leading up to the actual vote, prevailing sentiment assumed the worst would not in fact happen. On June 23rd that calculation was abruptly recalibrated as the “leave” vote prevailed, sending global risk assets lower and the British Pound

That said, two weeks after the vote which sent asset managers around the world running for the safety of US Treasuries, risk appetite has returned to propel at least the US equity market to test historical highs and most currency markets, except the GBP, to return to relative stability. Some of the calm may be attributed to recognition that nothing changes in the UK for the short term, but more can now be attributed to the bounce back in US employment data that should erase last month’s concern and return the Federal Reserve to the conversation.


  • Similar to most other assets, the USD/CAD rate encountered high volatility in Juneand early July due to forces outside its borders but has now returned to its familiar range.
  • Despite above average movement, the Canadian Dollar range over the period failedto breach the low near 1.2500 set in early May, nor pierce the resistance level of 1.3200.
  • With sentiment settling back down, arguments in or out of favor for the currency should return to focus on crude oil which has topped out near $50 per barrel and the US/Canadian interest rate differential which may have tipped back in the US favor following the latest respective employment reports.
  • From the USD/CAD chart below, it appears attention remains focused on whether or not the pair can extend above 1.3115 to extend higher or return to its recent familiar range.

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This communication is generated by the Foreign Exchange sales and trading unit of KeyBank and conveyed as commentary on economic, political and/or market conditions or, in some cases, may be considered to be a general solicitation for entering into foreign exchange transactions, as contemplated under Commodity Futures Trading Commission (“CFTC”) Regulation 23.605, and is not a “research report” as defined therein. This communication is not to be construed as a recommendation or opinion with respect to any foreign exchange transaction, or any trading strategy involving a foreign exchange transaction for purposes of CFTC Part 23 Regulations. This communication does not take into account the investment objectives, financial conditions, or needs of individual parties and is not intended to serve as a basis for entering into a foreign exchange transaction or to suggest, in any manner, that a party should enter into a particular foreign exchange transaction or trading strategy involving a foreign exchange transaction. Parties should consult their own advisors for opinions and advice on whether to enter into any foreign exchange transaction or trading strategy involving a foreign exchange transaction. The information contained herein has been obtained from sources deemed to be reliable but it is not represented to be accurate, complete or objective. In providing this information, neither KeyBank nor any affiliate of KeyBank is acting as your agent, broker, advisor, or fiduciary, or is offering ant tax, accounting, or legal advice regarding these instruments or transactions. KeyBank may have current positions or strategies that may be inconsistent with any views expressed herein.

Data sourced from Thompson Reuters and Bloomberg.
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