FOREX CURRENCY FORECAST ( )

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1 Ontario, Canada, L3R 0B Fax: FOREX CURRENCY FORECAST ( ) FOREX MAJORS (USD) SPOT Q1a Q2a Q3f Q4f Q1f Q2f Q3f Q4f Canadian Dollar USD/CAD Euro EUR/USD Japanese Yen USD/JPY British Pound GBP/USD Swiss Franc USD/CHF Australian Dollar AUD/USD New Zealand Dollar NZD/USD OTHER PAIRS (USD) SPOT Q1a Q2a Q3f Q4f Q1f Q2f Q3f Q4f Mexican Peso MXN/USD Chinese Renminbi CNH/USD Indian Rupee INR/USD South African Rand ZAR/USD Polish Zloty PLN/USD CANADIAN CROSSES SPOT Q1a Q2a Q3f Q4f Q1f Q2f Q3f Q4f Euro EUR/CAD Japanese Yen CAD/JPY British Pound GBP/CAD 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 Mexican Peso MXN/CAD

2 Ontario, Canada, L3R 0B Fax: SEPTEMBER CURRENCY HIGHLIGHTS USD The Fed s tightening bias is now being promoted more forcefully by FOMC members including Chair Yellen. In light of hawkish signals by the Fed, we have brought forward the timing for the first rate hike to December of this year. That should maintain the US dollar on an upward trajectory over the balance of the year as markets eventually get to price a full hike. Thereafter, the currency will struggle and likely suffer a broad-based depreciation in Bias bullish (stronger USD) CAD While the Canadian dollar has shown resilience in recent months, the currency nonetheless remains highly vulnerable. The large current account deficit remains the loonie s Achilles heel and are are reiterating our call for USDCAD to be in the 1.35 range by the end of the year before the rebounding and trading in a slightly stronger range next year. Bias bearish (weaker CAD) EUR The European Central bank seems adamant to remain on the sidelines to assist a weak Eurozone economy saddled with weak growth and below-target inflation. With interest rates already deep in negative territory, the ECB may instead opt for an enhanced asset purchase program and targeted loans to rekindle credit growth. Such stimulus should keep bond yields low and the euro under pressure. We call for an end-of year target of 1.08 for EURUSD. Bias bearish (weaker EUR) JPY Though the yen continues to remain at elevated levels, most analysts maintain a bearish view on the back of central bank policy divergence. The Bank of Japan is under pressure to act to kick-start a weak economy and stem resurgent threats of deflation. Further monetary stimulus could push USDJPY to higher in the coming months and could target 105 by the year-end. Bias bearish (weaker JPY) GBP GBP weakness appears set to continue and we continue to maintain a bearish view on the back of deteriorating growth prospects in the UK, which may trigger further aggressive action by the Bank of England. The pound will also continue to remain vulnerable as a result of an increasingly wider policy divergence between the BoE and the Fed. The GBP is likely to fall further in the coming months possibly reaching the mid 1.20 s before stabilizing. Bias bearish (weaker GBP) MXN The political scandals in Mexico are mounting but have not yet hurt the currency. Working against this backdrop political concern, there seems to be declining risks of a major shock to the NAFTA. Whereas early US campaign talk included an end of NAFTA, both of the leading candidates now seem to discuss an update of the treaty, which may even be positive. Despite the political risks, most analysts remain bullish on the MXN especially with the steady growth experienced in the U.S. Bias bullish (stronger MXN)

3 Ontario, Canada, L3R 0B Fax: SEPTEMBER US DOLLAR HIGHLIGHTS September f 2017f Spot Q1a Q2a Q3f Q4f Q1f Q2f Q3f Q4f USD/CAD Consensus Forecast EUR/USD Consensus Forecast JPY/USD Consensus Forecast GBP/USD Consensus Forecast MXN/USD Consensus Forecast U.S. DOLLAR A disappointing first half of the year left US yields weak and took the greenback moderately lower in the process against other G10 currencies. Soft growth temporarily took the FOMC off the tightening path, pulling long rates down in the process. Without the attraction of rising yields, the US dollar struggled given the net outflows associated with the United States trade and current account deficits. Central banks in other developed economies have tried to ease policy with a view to weakening their respective currencies against the dollar, but have found little success thus far in 201. Indeed, Fed policy has dictated the majority of currency developments, with the exception of Brexit s hit to the pound. Looking ahead, improving US economic performance should bolster both Fed hike expectations and the US dollar as we move toward the end of the year. A rate hike before the year-end is not yet fully priced in which suggests that the greenback is likely to gain against just about every G10 currency in the coming four months. Looking past 201, the US dollar is likely to face a different type of headwind, which should see other developed economies gain speed as a result of past stimulus. The US will no longer stand out as a lone bright spot and as a result the U.S. dollar is likely to lose ground against its global counterparts in Overall, most analysts look to be long the US dollar for now but continue to warn that gains in the greenback could be short lived. AUGUST 201 CURRENCY RETURNS 1.0% 0.8% 0.% 0.4% 0.2% 0.0% CAD EUR JPY GBP MXN -0.2% -0.4% -0.% -0.8% -1.0% EVENTS TO WATCH SEPTEMBER 201 USD Retail Sales SEPT 15 USD (PPI) Producer Price Index SEPT 15 USD (CPI) Consumer Price Index mtfxanalytics@mtfx.ca SEPT 1 USD Building Permits SEPT 20 USD Fed Interest Rate Decision SEPT 21

4 Ontario, Canada, L3R 0B Fax: USD/CAD SEPTEMBER 201 HIGHLIGHTS September f 2017f USD/CAD Spot Q1a Q2a Q3f Q4f Q1f Q2f Q3f Q4f Forecast Consensus Forecast USD/CAD CURRENCY TREND - AUGUST 201 EVENTS TO WATCH SEPTEMBER 201 CAD Manufacturing Sales SEPT 1 CAD Wholesale Sales SEPT 21 CAD Consumer Price Inflation (CPI) SEPT 23 CAD Retail Sales SEPT 23 CAD (GDP) Gross Domestic Product SEPT 30 The first half of the year wasn t a pretty story for Canada. Wildfires in Alberta put large swaths of the country s oil output offline. The desired pickup in exports looks even further away, leaving Canada with a sizeable trade and current account deficit. And consumption growth has decelerated heading into mid-year. Looking ahead, however, the loonie is likely to stumble heading into the end of the year. With growth set to pick up from its disappointing pace south of the border, the FOMC is nearing its next rate increase, which we expect in December. September s meeting, if not an outright hike, should at least add a bit to the recently more hawkish tone. It s not hard to see the loonie depreciating from here in the short term. While the Federal Reserve will continue its hiking cycle, albeit very gradually in 2017, better economic readings north of the border combined with higher oil prices should support the loonie. Overall, while the loonie will see a rebound from its fourth quarter weakness as we look for it to remain within its recent range over 2017.

5 Ontario, Canada, L3R 0B Fax: EUR/USD SEPTEMBER 201 HIGHLIGHTS September f 2017f EUR/USD Spot Q1a Q2a Q3f Q4f Q1f Q2f Q3f Q4f Forecast Consensus Forecast EUR/USD CURRENCY TREND - AUGUST 201 EVENTS TO WATCH SEPTEMBER 201 EUR German ZEW Economic Sentiment SEPT 13 EUR Consumer Price Inflation (Eurozone) (August) SEPT 15 EUR German Manufacturing PMI SEPT 23 EUR German IFO Business Climate Index SEPT 2 EUR German Unemployment Change (Sept) SEPT 29 The EUR has performed reasonably well over the past month. Indeed, the common currency has capitalized on the recent bout of USD malaise while also continuing to benefit from its current account surplus. Additionally, the flash estimate of Q2 growth saw the Eurozone economy expand by 1.% year/year, good enough to eclipse the underwhelming 1.2% for the US. The common currency area remains uncomfortably close to deflation territory with the annual inflation rate in August at a measly 0.2%. With governments showing little urgency to act and long-term inflation expectations falling to record lows, monetary easing can be expected from the ECB going forward. The risk of additional ECB action is highly likely which will cause the ECB s balance sheet to balloon and begin to approach the size of the U.S., ultimately weighing on the euro in the near term. In addition to the economic woes faced by the region, political risks will also weigh on the currency, which are likely to result in serious implications for the Eurozone. Look for the euro to weaken from its current levels in the coming months.

6 Ontario, Canada, L3R 0B Fax: JPY/USD SEPTEMBER 201 HIGHLIGHTS September f 2017f JPY/USD Spot Q1a Q2a Q3f Q4f Q1f Q2f Q3f Q4f Forecast Consensus Forecast JPY/USD CURRENCY TREND - AUGUST 201 EVENTS TO WATCH SEPTEMBER 201 JPY Industrial Production SEPT 14 JPY Exports SEPT 20 JPY Trade Balance SEPT 20 JPY Household Spending SEPT 29 JPY Consumer Price Index SEPT 29 A vote of confidence in the upper house elections last month did little to propel Abe s platform. Markets came away disappointed with both the fiscal measures and the lack of a policy re-think at the latest BoJ meeting. This disappointment has led to incremental yen appreciation, implying unwelcome pressures on Japanese exporters and the equity market. On the real economy side, the underwhelming Q2 GDP result highlighted the still-fragile nature of the economy, while inflation continues to be subdued. That the JPY has been the top performing currency among the G10 bloc over the past month which has accentuated already depressed inflation expectations, asset prices and economic growth forecasts. Looking ahead, a knocked down outlook for the Japanese economy, a gradual improvement in risk sentiment in the markets and a diverging monetary policy stance between the BoJ and the Fed will all contribute to a yen depreciation against the US dollar in the months ahead. Moreover, another rate hike from the Fed around the end of the year will keep pressure on the currency as 201 comes to an end.

7 Ontario, Canada, L3R 0B Fax: GBP/USD SEPTEMBER 201 HIGHLIGHTS September f 2017f GBP/USD Spot Q1a Q2a Q3f Q4f Q1f Q2f Q3f Q4f Forecast Consensus Forecast GBP/USD CURRENCY TREND - AUGUST 201 EVENTS TO WATCH SEPTEMBER 201 GBP (CPI) Consumer Price Inflation SEPT 13 GBP Employment Data SEPT 14 GBP Retail Sales SEPT 15 GBP Interest Rate Decision SEPT 15 GBP (GDP) Gross Domestic Product SEPT 30 Following a significant decline in the Brexit aftermath, the GBP has stabilized over the past month at just above the 1.30 mark. Given that we re still early into the Brexit shock and sentiment remains incredibly negative. There continues to remain extreme economic and political uncertainty, which will continue to reprice and downgrade U.K. assets and the value of the pound. There remains a tricky road ahead with plenty of opportunity to weaken the pound from current levels. The Brexit process has hardly started with most expecting the newly formed government to trigger article 50 sometime in Given such uncertainties, and the fact that any shocks to capital spending will take longer to show up, a recession in the British economy cannot be ruled out. Expect ongoing scrutiny of post-brexit data over the coming months. Add to the mix that the UK is still exposed to large external liabilities, and it underlines the need for GBP to remain substantially below long-term, fair-value estimates. As a consequence, analysts expect a further weakening of the pound before recovering in 2017.

8 Ontario, Canada, L3R 0B Fax: MXN/USD SEPTEMBER 201 HIGHLIGHTS September f 2017f MXNUSD Spot Q1a Q2a Q3f Q4f Q1f Q2f Q3f Q4f Forecast Consensus Forecast MXN/USD CURRENCY TREND - AUGUST EVENTS TO WATCH SEPTEMBER 201 MXN Consumer Price Index SEPT 22 MXN Retail Sales SEPT 23 MXN Trade Balance SEPT 27 MXN Unemployment Data SEPT 28 MXN Interest Rate Decision SEPT 29 USDMXN volatility has remained elevated, but the trend seems downward for USDMXN. Minutes released by the central bank remained on the hawkish side. Analysts expect another pre-emptive fondeo rate rise on November 20th to 4.5%, following the US elections but before the December US Fed meeting. Though external developments have dictated the currency s direction, domestic fundamentals are expected to take hold over the coming months that should allow the MXN to outperform as growth accelerates over the next several months, especially with continuing steady growth in the United States. Despite the slow start to the year and the risks of the looming U.S. elections, the Mexican peso is likely to outperform most of the emerging market currencies. Most analysts expect domestic fundamentals to remain strong and growth to expand at 3% in 201 suggesting a strong MXN rebound as markets settle.

9 Ontario, Canada, L3R 0B Fax: FOREIGN EXCHANGE DISCLAIMER This publication has been prepared by Inc. for informational and marketing purposes only. Opinions, estimates and projections contained herein are our own as of the date hereof and are subject to change without notice. The information and - opinions contained herein have been compiled or arrived at from sources believed reliable, but no representation or warranty, express or implied, is made as to their accuracy or completeness and neither the information nor the forecast shall be taken as a representation for which Inc., its affiliates or any of their employees incur any responsibility. Neither Inc. nor its affiliates accept any liability whatsoever for any loss arising from any use of this information th Avenue, Suite 30 Markham, Ontario Canada L3R 0B Fax: This report has been prepared by Inc. as a resource for its clients. The opinions, projections and estimates contained herein are our own and subject to change without notice.