FOREX CURRENCY FORECAST ( )

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1 th Avenue, Suite 30 Markham Ontario, Canada, L3R 0B Fax: FOREX CURRENCY FORECAST ( ) FOREX MAJORS (USD) SPOT Q1f Q2f Q3f Q4f Q1f Q2f Q3f Q4f Canadian Dollar USD/CAD Euro EUR/USD British Pound GBP/USD Japanese Yen USD/JPY Swiss Franc USD/CHF Australian Dollar AUD/USD New Zealand Dollar NZD/USD OTHER PAIRS (USD) SPOT Q1f Q2f Q3f Q4f Q1f Q2f Q3f Q4f Chinese Renminbi CNY/USD Indian Rupee INR/USD South African Rand ZAR/USD Polish Zloty PLN/USD Kenya Shilling KES/USD CANADIAN CROSSES SPOT Q1f Q2f Q3f Q4f Q1f Q2f Q3f Q4f Euro EUR/CAD British Pound GBP/CAD Japanese Yen CAD/JPY Swiss Franc CAD/CHF Austalian Dollar AUD/CAD New Zealand Dollar NZD/CAD Chinese Renminbi CNY/CAD Indian Rupee INR/CAD South African Rand ZAR/CAD Polish Zloty PLN/CAD Kenya Shilling KES/CAD

2 th Avenue, Suite 30 Markham Ontario, Canada, L3R 0B Fax: FEBRUARY CURRENCY HIGHLIGHTS USD The US dollar continues to remain the darling currency of The collapse in oil prices is a win as America is still a net importer of oil. The collapse in oil means cheaper goods and more disposable income allowing domestic growth to accelerate. The US will continue to gain momentum in 2015 and we are more than happy to jump on the bandwagon. CAD The Bank of Canada surprised the markets last month with a rate cut of 25-bp, we re expecting another 25-bp cut which seems to have already been priced in by the markets. A weaker Canadian growth profile compared to the US, a more pronounced rate spread between the Fed and the BoC, and the nosedive in oil will effectively crush the loonie in the coming months. EUR Draghi finally came through last month with some much needed QE. The proposed QE plan was twice as large what the street was expecting and has sent the Euro into a nosedive. The Euro s slide is by no means over with the market looking for a test of Though some analysts are calling for a 1:1 euro-dollar, we find parity to be unlikely. GBP The fate of the pound will be driven by politics rather than economic fundamentals in the medium term. With elections scheduled for May 7th neither of the two main parties seem capable of winning a majority leaving the market worried about an unstable government. However, the growth profile for the UK remains strong with the pound expected to rebound in Q3.

3 th Avenue, Suite 30 Markham Ontario, Canada, L3R 0B Fax: FEBRUARY CURRENCY HIGHLIGHTS February f 201f Spot Q1f Q2f Q3f Q4f Q1f Q2f Q3f Q4f USD/CAD Consensus Forecast EUR/USD Consensus Forecast GBP/USD Consensus Forecast U.S. DOLLAR COMMENT: The US dollar remains the king of 2015 and investors continue to increase holdings in the USD as a result of strong economic fundamentals. The US economy seems to be gaining momentum with growth continuing to accelerate. Consumer confidence is strong and is likely to continue to improve aided by the drop in oil and gasoline prices. Unemployment is at multi-year lows and macro-economic data suggests that the US economy is poised to expand with a ramp up in industrial production, rising capacity utilization and housing starts. The collapse of oil prices is sending chills through many developed and emerging markets but for the US cheap oil is a win. The collapse in oil means cheaper goods and more disposable income allowing domestic demand and growth to accelerate. In this environment the USD is expected to appreciate against the majors with support from both fundamentals and flows. Declining oil prices will likely act as a positive catalyst for the USD in the near term. Strong fundamental economic data has reinforced the view that the Fed will begin to raise interest rates in Q Recent comments from the Fed have reinforced this bullish view which has resulted in a significantly stronger greenback against most of the majors. The only credible risk to the bullish sentiment of the Fed could be a soft global growth profile stemming from Asia and Europe. Overall the USD remains the currency of choice in 2015 and is well positioned for further upward momentum against its peers. JANUARY CURRENCY RETURNS 0% -2% CAD EUR GBP -4% -% -8% -10% -12% -14% -1% -18% USD ISM Manufacturing PMI FEB 02 USD ADP Nonfarm Payrolls FEB 04 USD Unemployment Rate FEB 0 USD Non Farm Payrolls FEB 0 USD Core Retail Sales FEB seems to be the year of the US dollar.

4 th Avenue, Suite 30 Markham Ontario, Canada, L3R 0B Fax: USD/CAD FEBRUARY 2015 HIGHLIGHTS February f 201f USD/CAD Spot Q1f Q2f Q3f Q4f Q1f Q2f Q3f Q4f Forecast Consensus Forecast USD/CAD CURRENCY TREND HIGHLIGHTS: CAD Ivey PMI FEB 04 CAD Trade Balance FEB 05 CAD Building Permits FEB 0 CAD Employment Data FEB 0 CAD Retail Sales FEB 20 The bank of Canada surprised the markets last month with a 25-bp cut, and we re expecting another 25-bp cut in March given the collapse in oil. The second rate cut seems to be priced in to the loonie given the spectacular collapse in the month of January. A weaker Canadian growth profile compared to the US, a more pronounced rate spread between the Fed and the BoC, and the nosedive in oil and other commodities will provide a potent mix to effectively crush the loonie in the coming months. The weaker loonie should help exports and a recovery in oil prices could suggest a firmer loonie. However, the need to have exports become driving force of our economy and take the lead from housing and debt-driven growth seems a stretch. Expect loonie in the longer term. MARKET SENTIMENT: Bearish Bullish

5 th Avenue, Suite 30 Markham Ontario, Canada, L3R 0B Fax: EUR/USD FEBRUARY 2015 HIGHLIGHTS February f 201f EUR/USD Spot Q1f Q2f Q3f Q4f Q1f Q2f Q3f Q4f Forecast Consensus Forecast EUR/USD CURRENCY TREND HIGHLIGHTS: EUR German Manufacturing PMI FEB 02 EUR Retail Sales FEB 04 EUR German GDP FEB 13 EUR German Economic Sentiment FEB 17 USD German Manufacturing PMI FEB 20 Draghi and the ECB finally delivered QE to the Eurozone with the purchase of 0 billion euros per month through to September 201. The ECB committed to a plan that was twice what the street was expecting resulting in the collapse of the Euro to multi- year lows. The Euro lost 12% in 2014 and should continue its slide as the ECB rolls out its QE program. The lower exchange rate and lower financing costs should boost economic growth in the region and significantly improve economic fundamentals. The Euro s slide is by no means over with the markets eyeing the 2003 lows of Though some analysts have talked about a 1:1 euro-dollar, parity it seems unlikely given that economic fundamentals and a current account surplus should being to improve and stabilize the currency. MARKET SENTIMENT: Bearish Bullish

6 th Avenue, Suite 30 Markham Ontario, Canada, L3R 0B Fax: GBP/USD FEBRUARY 2015 HIGHLIGHTS February f 201f GBP/USD Spot Q1f Q2f Q3f Q4f Q1f Q2f Q3f Q4f Forecast Consensus Forecast GBP/USD CURRENCY TREND HIGHLIGHTS: GBP Manufacturing/Services PMI FEB 2/4 GBP BoE Interest Rate Decision FEB 05 GBP Consumer Price Inflation FEB 17 GBP Employment Data FEB 18 GBP Retail Sales FEB 20 While we agree with most analysts that there is a very small chance that the BoE will be raising rates before Q3-2015, our call is that the markets are over-dovish on the pound. Similar to 2014 the pound has the potential to surprise in the second half of Economic fundamentals in the UK are strong compared to its peers, however, in the near term the pound will largely be driven by politics with the UK parliamentary elections scheduled for May7th. Neither of the two main parties seem capable of winning a majority leaving the market worried about an unstable government. We expect politics to weigh on the GBP in the first half of the year, however, given the strong economic fundamentals we expect the UK outperform most of its peers in Q3/Q4 of 2015 giving a significant boost to the pound. MARKET SENTIMENT: Bearish Bullish

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