Preparing for 2016

As we move closer to end of 2015 trading has been relatively light as most traders have opted to take an extended holiday.  Oil prices continue to be the main drama setter, with prices for both WTI and Brent indexes under renewed pressure after the pre-Christmas surge.  This has seen the share prices and currencies of energy producers take a knock while the loonie has managed to stay above the fray, holding onto its gains from earlier in the week.  Looking outside of its positioning against the loonie, the greenback is broadly higher as both the euro and pound lose ground to their American counterpart while across the pacific the Yen is trading flat against the dollar.

With an eye towards Asian equities, it’s clear to see that the combined effects of the great commodity crash of 2015 along with the seasonal period of low volatility have conspired to put traders in a fragile mood as equity indices in Japan and China couldn’t hold onto much of their gains for the day and closed out trading only slightly higher.  As trading moves to European markets the pressure on risk assets continues unabated, with indices covering the broader EU as well as the UK, France and Germany all taking a bath in lockstep with the 2% loss seen in Brent Crude.

As the penultimate day of trading in 2015 is set to open in North America this morning we move closer to capping off a year that has been unprecedented for the currencies and the broader capital markets.  2015 has seen corporate organisations in Canada and internationally contending with the impacts of relatively extreme fluctuations in the values of the currencies in which they transact as broader developments within the global macroeconomic landscape impact their businesses in ways previously hard to imagine.  Within this context, an ever increasing amount of fickle capital flowing through capital markets, diverging monetary policy in North America, Europe and Asia, as well as a rapidly slowing Chinese economy and overall slower economic growth globally, the stage is set for a 2016 that will be as volatile if not more so than the year now closing.  With that said now more than ever it makes sense for managers to determine the implications of FX volatility on their business and work with their trading teams to outline a strategy that will allow them to secure their business and enhance their competitive position as we move into the New Year.

Further reading:

EUR/USD, USD/JPY, GBP/USD Pivot Points, TA – December 30 2015

2016 FX Outlook: The Year The USD Peaked – Credit Agricole