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RISK MANAGEMENT

TAKING CONTROL OF CURRENCY EXPOSURE BEFORE THE US ELECTION

THIS IS

Your US Presidential Election Guide and Currency Strategy Guide

Could the US Election ‘trump’ Brexit?

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Potential US Election scenarios

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How to prepare your business before the US Election

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* Oxford Economics is one of the world’s foremost independent global advisory firms, providing reports, forecasts and analytical tools on 200 countries, 100 industrial sectors and over 3,000 cities and is a key adviser to corporate, financial and government decision-makers and thought leaders.

Could the US Election ‘trump’ Brexit?

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Ratings agency Moody’s believes the US Election is the number one global risk for markets to consider – more so than Brexit – with Donald Trump a candidate to govern the world's biggest economy. In its latest economic outlook, the International Monetary Fund also singled out increasing political risks which are impacting exchange rates. For example, the Brexit vote in June triggered an immediate 10% drop in Sterling.

To give you visibility of what is at stake in the upcoming US Election on November 8th, and how the result could impact currency markets and your business, we've partnered with Oxford Economics* to bring you our US Election Insight and Currency Strategy Guide.

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How could this election impact the US economy?

The leading candidates to become the next US President are Hillary Clinton (Democrats) and Donald Trump (Republicans) and the two are proposing sharply different policy outlooks for the US. Trump’s proposals are considered more right-wing and extreme and could risk tipping the US into recession. Any material changes in the US could have real implications for global growth and the outlook for all currencies.

Sources: Oxford Economics, WUBS

Current Election Opinion Polls

Hillary Clinton(Democrat) 44.3 %

40.6 %Donald Trump(Republican)

44

42

40

38

36

40

30

20

10

0

10.5%

Oth

er

Do

nal

d T

rum

p(R

epu

blic

an)

31.2%

Hill

ary

Clin

ton

(Dem

ocr

at)

42.2%

National polling average to October 10, 2016 Financial Times’ Poll Tracker (uses analysis from Real Clear Politics)

October 6, 2016 / 1,720 respondents Reuters/Ipsos Poll (poll only registered voters with voting history)

2015

3.5%

3.0%

2.5%

2.0%

1.5%

1.0%

0.5%

0.0%

Forecast ClintonBaselineTrump moderateTrump adverse

2016 2017 2018 2019 2020

US GDP Forecasts

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Potential US Election scenarios

Here is our US Election Scenario Matrix to help you carry out an assessment on how the potential election outcomes could impact your currency exposure and planning for 2017.

CLINTON POSITIVE CLINTON MODERATE TRUMP MODERATE TRUMP ADVERSE

Hillary Clinton Win Donald Trump Win

Our rationale

Convincing win, allowing for policy continuity.

Market-friendly, risk-on

Republicans win enough seats to make proposals

hard to pass

Our rationale

Trump tempers radical proposals which become

difficult to implement

Trump win stokes uncertainty over US trade and

foreign policies

US Monetary policy implications

Fed more inclined to raise rates sooner rather

than later

Modest U.S. growth suggest Fed less inclined

to raise rates

US Monetary policy implications

Fed seen less inclined to raise rates, if Trump win should rattle markets, pose economic threat

Fed caution grows, casting doubt on imminent rate hike.

Markets turn risk-averse

Subsequent short-term reaction in currency markets

• USD positive • Limited scope for USD rally

Subsequent short-term reaction in currency markets

• USD negative • Safe havens outperform• USD struggles vs JPY, CHF,

strengthens vs riskier EUR, CAD, GBP

Potential FX target levels

• EUR/USD $1.05• GBP/USD $1.18•USD/CAD $1.35

• EUR/USD $1.07• GBP/USD $1.20•USD/CAD $1.33

Potential FX target levels

• EUR/USD $1.15• GBP/USD $1.30• USD/CAD $1.30

• EUR/USD $1.17• GBP/USD $1.33• USD/CAD $1.27

Important considerations

USD could appreciate by approximately 3-5% from

pre-election levels

Focus to shift quickly back to recent US economic data and

probability of December rate hike

Important considerations

After sharp knee-jerk reaction we expect Trump to dampen

populist rhetoric and markets to assess longer-term implications

Forecast is dependent on global cash and capital flows. Our

‘central case’ is for risk aversion to cause default USD gains

By UK & EMEA Currency Analysts - Nawaz Ali and Guillaume Dejean

Important note: The scenarios represent our hypothetical ‘central case scenarios’ only, meaning we do recognize there are potential outcomes that fall outside of these. The information presented herein should not be construed as an endorsement of either US presidential candidate by The Western Union Company or any of its subsidiaries.

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Before the November 8th election, it’s critical for your business to carry out an assessment on the possible scenarios that could impact your currency exposure and planning for 2017.

How to prepare your business before the US Election

You need to make a €500,000

payment in 3 months’ time

If your exchange rate is $1.12, your payment would cost $560,000

However, in 3 months’ time if Mr. Trump

wins, the rate may move to $1.15

In this scenario, you could pay $575,000. $15,000 more than

expected.

* Access the WU® EDGE platform for free by registering at Western Union Business Solutions.com

^ Options products allow you to lock in a rate of exchange to protect your profits, and give you the ability to benefit if the market moves in your favour. There are disadvantages to consider such as a slightly less favourable protection rate versus a comparable Forward, but please speak to our hedging experts to understand more about the costs and benefits which can vary with each. Western Union Business Solutions is an issuer of foreign exchange solutions and would be a counterparty to any transactions you enter into with us. Eligibility requirement may apply.

2. TAKE ACTION WITH THE WU® EDGE PLATFORM*

The Volatility Slider Tool will help you simulate these

potential scenarios.

1. ASSESS OUR SCENARIO MATRIXUnderstand how the US

Election could impact exchange rates.

3. DEVELOP A HEDGING STRATEGYChoose the right products to mitigate your risks and

protect profits.

4. EXECUTE WITH THE RIGHT TOOLS

Consider Market Orders to pro-actively target or protect

preferential rates.

Forwards

Options^

Spot

Market Orders1 2 3 4 5 6 7 8 9 10 11 12

400

300

200

100

US Election Scenario Matrix

Consider this example of how fluctuation can impact an international payment

Take action and assess your currency exposure with us

before the US Election

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Currency volatility can have serious repercussions for your international business.

© 2016 Western Union Holdings Inc. All rights reserved.

Western Union Business Solutions is a division of The Western Union Company. Services in Canada are provided by Custom House ULC, a company within the Western Union Business Solutions (WUBS) division.

This brochure does not create any binding obligation on any party, nor does this brochure constitute an offer or a solicitation of an order. Any such offer or solicitation will only be made, and the relationship between you and WUBS shall be governed by the applicable terms and conditions and any transaction-specific documentation entered into between you and WUBS. No representations, warranties or conditions of any kind, express or implied, are made herein.

WUBS is the issuer of the products discussed herein and would be a counterparty to any transaction you undertake with WUBS. This brochure is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject WUBS or its affiliates to any registration or licensing requirement within such jurisdiction.

Customers may be required to meet certain eligibility requirements in order to enter into foreign exchange transactions with WUBS. Claims regarding the products discussed and other information set out herein are general in nature and do not take into account your specific objectives, financial situation, or needs. This brochure does not constitute financial advice or a financial recommendation. You should use your independent judgment and consult with your own independent advisors in evaluating whether to enter into a transaction with WUBS.. WUBS has based the opinions expressed herein on information generally available to the public. WUBS makes no warranty concerning the accuracy of this information and specifically disclaims any liability whatsoever for any loss arising from hedging decisions based on the opinions expressed and information contained herein. Such information and opinions are for general information only and are not intended to present advice with respect to matters reviewed and commented upon. RM-161004

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