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Barclays Global FX Quarterly Fed On Hold Eyes On Growth
Barclays Global FX Quarterly Fed On Hold Eyes On Growth
September 2013
Global FX Quarterly
Fed on hold, eyes on growth
PLEASE REFER TO THE LAST PAGE FOR ANALYST CERTIFICATION(S) AND IMPORTANT DISCLOSURES.
CONTENTS
Top Trades ............................................................................................... 2
Our top three thematic trades are short AUD/CNH, long 6m GBP/USD put spread and long
EUR/CHF. Our top two relative value trades are short ZAR, TRY against MXN, PHP and long
EUR/CZK.
Overview ................................................................................................... 3
Fed on hold, eyes on growth
The Feds decision to postpone tapering delays, but does not derail our constructive USD
outlook. We expect the delays to add USD250bn to the Fed balance sheet; hence, we expect
the USD to trade sideways with a downward bias in the near term.
Theme 2: EM .......................................................................................... 13
Square carry shorts until tapering
For the first time since the start of the year, we recommend taking profits on our short EM
carry positions, adopting a more neutral stance. We recommend being long the RUB,
staying short the ZAR and neutral the MXN.
26 September 2013
FX STRATEGY
Top trades 1
Jose Wynne
+1 212 412 5923
jose.wynne@barclays.com
Aroop Chatterjee
+1 212 412 5622
aroop.chatterjee@barclays.com
Thematic trades
1. Short AUD/CNH spot
China growth is expected to remain under pressure, despite the recent bounce-back in data.
CNY appreciation will likely continue to be used as a tool for rebalancing (toward
consumption), while lower investment and growth should weigh on the AUD.
26 September 2013
Please refer to the Open Trades table for the specifics on these recommendations.
OVERVIEW
The Feds decision to postpone tapering delays, but does not derail, our constructive
USD outlook. We expect the delays to add USD250bn to the Fed balance sheet; hence,
we expect the USD to trade sideways with a downward bias in the near term.
The EUR should trade in a range until later in Q4, when we expect to re-engage in short
EUR/USD positions. Tapering and a stronger US growth outlook, combined with ECB
LTROs, should favour a weaker EUR. Fed measures and economic recovery should be
CHF-negative. We recommend tactical long EUR/CHF positions at current levels.
We expect Chinese growth to remain under pressure, despite the recent bounce back in
data. CNY appreciation will likely continue to be used as a rebalancing tool (toward
consumption), while lower investment and growth should weigh on the AUD. We
recommend short AUD/CNH in spot.
For the first time since the start of the year, we recommend taking profits on our short
EM carry positions, adopting a more neutral stance. We recommend being long the
RUB, staying short the ZAR and neutral the MXN.
Stronger UK data and disappointment in BoE forward guidance have pushed GBP up.
We think the good news is priced and expect underlying headwinds to re-emerge,
putting downward pressure on GBP. Buy a 6m GBP put spread (1.60 vs 1.55).
FIGURE 2
Passive tightening to be addressed with another LTRO
(December)
normalised
1,200
1,000
800
600
-1
400
-2
US
Emerging economics
Euro area
UK
Japan
-3
-4
-5
07
08
09
26 September 2013
10
11
12
13
200
150
100
50
200
0
Jun-09
Apr-10
Feb-11
Jan-12
Nov-12
0
Sep-13
3bn payback
EONIA fixing, bp
Exp. Eonia, bp
depo facility, bp
refi rate, bp
FIGURE 3
Eurozone domestic demand is structurally weak
Index
US
110
EA
Japan
FIGURE 4
US corporate profitability at record highs
UK
24
105
22
100
20
95
18
90
16
14
85
12
80
10
75
3mma, SA 2007=100
70
07
08
26 September 2013
09
10
11
12
13
70
75
80
85
90
95
00
05
10
15
Corporate profits as a % of gross value added by the corporate
sector (sa)
Square underweight in the BRL and INR, stay neutral on the MXN. Mexicos structural
reforms are likely to deliver improved growth and a stronger currency, but the loss of
cyclical momentum and easier monetary policy implies balanced risks for the MXN.
Furthermore, the high carry offered by the BRL and INR seems attractive from a riskadjusted perspective, now that firm policy intervention is in place.
Short ZAR, long RUB, and cautious TRY and IDR. A slightly more constructive global
context is not enough to outweigh external funding needs and declining activity in
South Africa. Policymakers in Turkey and Indonesia will likely continue to use the
exchange rate as a policy instrument to limit liability mismatches. The RUB offers a
relatively high carry, and spot is supported by improving prospects for oil prices.
Long PLN and MYR. A recovery of global manufacturing activity would benefit Poland,
while we think funding pressures on the MYR are likely over. Leading indicators point to
a growth pickup in these economies, especially given their relatively low vulnerability to
a sudden spike in global interest rates.
26 September 2013
The main surprises to our short EUR/USD position came from euro area activity data and
the Feds decision to delay tapering. We expect EUR/USD to range trade over the near term
with downside risks as the ECB re-takes control of the short end of the yield curve and
eases liquidity conditions through a VLTRO in late Q4. Further out, diverging growth trends
and the relative monetary policy outlook still point to EUR/USD weakness. A stable
EUR/USD near-term with depreciation ahead means that we keep our long USD/CHF
position. We recommend going long EUR/CHF spot on reduced fragmentation risks and
significant scope for unwinds of legacy long CHF positions amidst better sentiment in the
euro area.
Fed action has delayed the broad USD rally, which we had expected to encompass low
yielders such as the EUR. Indeed, the bigger disappointment emerging from the September
2013 FOMC, in our view, was continued reticence in allowing the short end of the yield
curve to price in rate hikes than the decision to delay the tapering in asset purchases. So far
in H2 13, the Fed has been more successful than the ECB in controlling the short end of the
yield curve, and the relative movement in short rates has supported EUR/USD.
Although we do not expect any aggressive policy shifts by the ECB, we expect it to cap any
steepening in the rates curve and/or a decline in the liquidity surplus. As such, we see
EUR/USD stuck in a range initially (1m forecast: 1.35), potentially weakening at the 3m
horizon (3m: 1.32) as the ECB responds to the liquidity tightening with a new LTRO. We still
believe monetary policy divergence will favour the USD over the EUR in the medium term,
though the pace of depreciation is likely to be relatively slow as the US curve is allowed to
steepen only gradually. We expect the weakening trend in EUR/USD to persist (6m forecast:
1.30, 12m: 1.27), with diverging medium-term prospects implying a more aggressive ECB than
the Fed. Euro area events that pose downside risks to our forecast profile include package
renegotiations in Portugal, Greece and Cyprus, as well as added political uncertainty (Italy).
FIGURE 2
Importance of each factor (beta * standard deviation)
0.5
%
100%
0.4
80%
0.3
60%
40%
0.2
20%
0.1
0%
-20%
-40%
-60%
13-Jun
-0.1
WTI
1-Jul
19-Jul
6-Aug
24-Aug
11-Sep
26 September 2013
1Y
spread
3M
LIBOR
spread
3M
LIBOR
spread
(level)
FIGURE 4
Equity mutual fund flows into each country/region, 2013
(mm, cumulative)
3m LIBOR sprd
14000
d(1Y-3m sprd)
d(10Y-1Y sprd)
12000
dlog(MSCI world)
10000
dlog(WTI)
8000
6000
4000
2000
0
-2000
-4000
-6000
Jan-13
0
Fitted
Source: Barclays Research
26 September 2013
Actual
Mar-13
Europe
May-13
Jul-13
Europe ex-UK
ECB to respond
We expect the ECB to find it tough to control EUR rates beyond the front end of the money
market curve as data in the euro area improve faster than market expectations. However,
we do expect the ECB to regain control of the very front end through the unveiling of
another VLTRO program in Q4 13. This would address any liquidity pressures (ie, as the
liquidity surplus falls below EUR200bn) and prevent EONIA moving up too sharply inside the
corridor. At the September press conference, ECB President Draghi included a paragraph on
liquidity conditions for the first time, and while stating the current level of excess liquidity
(c.EUR220bn) was adequate, the ECB will act to offset any future declines that affect the
FIGURE 5
Continued signs of a credit crunch
16
FIGURE 6
1y1y Eonia rates to stay capped
1.6
% y/y
14
12
1.50
1.45
1.2
10
8
1.40
0.8
1.35
0.4
1.30
2
0
0.0
1.25
-2
92
94
96
M3
98
00
M1
02
04
06
08
10
12
-0.4
Sep-10
Sep-11
1y1yf Rate differential
26 September 2013
1.20
Sep-13
Sep-12
EURUSD
10
1.7
350
1.6
300
3
2
-20000
1.5
250
200
1.4
150
1.3
100
1.2
50
1
-40000
-60000
-1
-2
-80000
1.1
1.0
-50
-100
Jan-09
FIGURE 8
Swiss banks total CHF foreign assets minus liabilities (LHS,
CHF mn) versus average Spanish and Italian deposit growth
(y/y, RHS)
0.9
Jan-10
Italy
26 September 2013
Jan-11
Spain
Jan-12
Jan-13
EURUSD
-3
-100000
-120000
Dec-11
-4
-5
Apr-12
CHF A-L
Aug-12
Dec-12
Apr-13
11
26 September 2013
12
THEME: EM
Koon Chow
+44 (0)20 7773 7572
koon.chow@barclays.com
Sebastin Brown
+1 212 412 6721
The quarter of a trillion USD of assets the Fed is likely to purchase before revising its current
policies should prop up demand for EM assets. These capital inflows are unlikely to fully
offset the exodus of funds from EM that has taken place this last quarter (Figure 1).
However, we do expect these investments to provide some much-needed breathing room
for EM policymakers, many of whom face challenging macro backdrops that include
funding pressures, dwindling global and domestic growth, inflationary pressures, declining
reserves, and political instability.
sebastian.brown@barclays.com
Against a backdrop of muted risk aversion and relatively attractive valuations (Figure 2), we
believe markets will price the different realities among EMs. We favour currencies of
economies likely to gain from the early signs of a synchronized resuscitation of developed
market economic activity and from Chinas apparent stabilization. Our preferred strategy is
to take profits on our short carry trades and to then combine long and short positions
within EM FX, aiming for an overall carry-neutral exposure to the asset class.
Policies and credibility: No longer short BRL and INR, still neutral on MXN
Mexicos structural reforms are still appealing and likely to deliver improved growth and a
stronger currency. However, the loss of cyclical momentum, which is likely to translate into
easier monetary policy and a worrisome erosion of the governments political capital in
Mexico, leads us to prefer a neutral stance on the peso ahead of crucial votes in Congress
regarding the energy reform.
Emerging market economies running significant current account deficits have also
experienced an upwards adjustment of their currencies carry (Figure 3). The volatility
dampening associated both with more supportive global risk tolerance and effective albeit
FIGURE 1
QEs survival will not fully reverse the outflows from EM
10
$bn
3.2
3.0
2.8
2.6
2.4
2.2
2.0
-2
1.8
-4
1.6
FIGURE 2
but it is likely to be supportive of under-valued currencies
30%
20%
BEER
valuation
-10%
1.4
-8
1.2
-30%
1.0
-40%
-20%
Dec-12
26 September 2013
Mar-13
Equities
Jun-13
Aug-13
PLN
TWD
INR
-20%
-6
-10
Sep-12
TRY
10%
0%
RUB
HUF
CZK
BRL
RON
ILS
PHP
CNY
THB
CLPIDR
MXN
MYR
KRW
ZAR
-10%
0%
10%
20%
30%
REER (current level / 10y average)
13
When sentiment is not enough: Cautious TRY and IDR and stay short ZAR
Despite the temporary rehabilitation of some high-yielding currencies, we believe there
are structural weaknesses in the countries that have experienced credit-driven economic
growth over the past five years (Figure 5). And while an intervention of USD60bn can
temporarily blur the structural weaknesses of Brazils economy and their effect on the BRL,
there is no such shield for the IDR and the TRY. Policymakers in Turkey and Indonesia will
continue to use the exchange rate as a policy instrument as currency-mismatched balance
sheets in the government and private sector turn any sell-off into an extremely costly event.
Thus, while we remain neutral, we recommend selling TRY and IDR on rallies.
A slightly more constructive global context is not supportive enough to expect anything
other than further depreciation of the ZAR. The ZARs well-known structural woes, external
funding needs, and declining activity, along with increasing inflationary pressures, shape
our very pessimistic view on the ZAR.
Upcoming elections in Indonesia, Turkey, and South Africa during 2014 are yet another
reason to be cautious about exposure to these currencies. To highlight the difference
between EM economies facing structural bottlenecks and those pushing for structural
improvements, as well as the effect of these diverging paths on the value of their currencies,
we reiterate our recommendation of being long a basket of MXN and PHP funded by a short
position in a basket of TRY and ZAR.
INR
BRL
TRY
RUB
CLP
ZAR
IDR
RON
MXN
HUF
CNY
PLN
MYR
KRW
THB
ILS
SGD
CZK
0.0
Last
Source: Barclays Research
26 September 2013
SA
2.0
Israel
4.0
Korea
6.0
Mexico
8.0
350
300
250
200
150
100
50
0
-50
-100
-150
Turkey
10.0
Bp
Thailand
12.0
Poland
FIGURE 4
but long-term real premia is low, except in Brazil*
Brazil
FIGURE 3
Attractive risk-adjusted carry of some CA-deficit currencies
Note: * EM real yields US real yields EM CDS spreads. Source: Barclays Research
14
FIGURE 5
Credit-driven growth economies face currency pressures
Brazil
Indonesia
Ukraine
Ghana
26 September 2013
Government
BRL
25
COP
15
PHP
MYR
MXN
-5
40
20
-30
-15
60
IDR
Hungary
80
RUB
-20
Nigeria
100
THB
-10
ZAR
Poland Malaysia
Mexico
Philippines India
Chile
Thailand
Romania Peru Russia
Korea
Colombia Taiwan
Venezuela
CLP
S. Africa
120
Serbia
TRY
10
External
debt % GDP
140
PLN
20
Turkey
HUF
30
FIGURE 6
Who can survive higher global interest rates?
Private sector
15
Local matters
Nick Verdi
+65 6308 3093
nick.verdi@barclays.com
Hamish Pepper
+65 6308 2220
hamish.pepper@barclays.com
Jian Chang
Recent economic data for China have confounded expectations of a hard landing that were
ubiquitous three months ago. Market sentiment gauged by the Shanghai composite index
and copper prices has been recovering gradually from its late-June trough at the height of
the interbank liquidity squeeze (Figure 1). The PBoCs hawkish stance and the perceived
willingness of the new government to avoid policy stimulus while deleveraging the
economy fuelled the worst hard-landing fears for China since 2011.
The trigger for a turn in market sentiment was hard economic data and began with the official
manufacturing PMI unexpectedly moving into expansionary territory in July. More recently, the
acceleration in industrial production growth to 10.1% y/y in July-August, from 9.1% in Q2,
was significant, signalling an improvement in Q2s 7.5% y/y growth rate to 7.7% in Q3. As
such, we recently fine-tuned our 2013 growth forecast to 7.6% from 7.5%. However, the
recent pickup in economic activity reflects the traditional drivers of Chinese GDP growth and is
being led by infrastructure investment, similar to the temporary rebound in Q4 12.
While we expect economic growth to accelerate in Q3, we forecast a slowing into year-end
and recently lowered our 2014 GDP growth forecast to 7.1% y/y from 7.4%, as rebalancing
increasingly takes hold (see China: The new norm No pain, no gain, 18 September 2013).
The Third Plenary Session of the 18th Central Committee in November will represent a
major marker on how the government intends to rebalance the economy away from fixed
FIGURE 1
Measures of China sentiment have improved recently
Index
USD/MT
2,500
25 July - China
announces mini
stimulus
package
2,300
2,200
2,100
8300
7800
7300
2,000
1,900
6800
1,800
Jan-13
Mar-13
May-13
26 September 2013
Jul-13
8800
2,400
FIGURE 2
Real GDP growth has tended to slow post-rebalancing
during past episodes
4.6
8.8
10.3
2.8
10.2
13.4
-5.1
-8.0
-7.7
1.1
2.9
9.1*
-3.5
-6.1
3.1*
4.6
2.3
2.2*
6300
Sep-13
Note: *China data are for the period since 2009. Source: WDI, Barclays Research
16
Chinas rebalancing process is underway, but is in the early stages. Although consumptions
share of GDP has increased, it has not yet led to a meaningful decrease in investment.
Historical parallels including Japan and Korea which faced rebalancing, albeit as a result of
financial crises support our view that GDP growth slows next year and beyond (Figure 2;
see also FX Mid-quarter Update: How does China matter for FX, 15 August 2013). However,
if the economy slows more sharply than we expect in 2014, the authorities willingness to
provide further stimulus at the expense of rebalancing will be tested. An important lesson this
year is the governments efforts to support the economy whenever hard landing fears
intensified, suggesting that USD/CNY volatility will remain subdued.
For now, the upside surprise in Chinas growth momentum has seen a decline in portfolio
outflows, to about USD32bn in July and August, respectively, from USD48bn in June. In
addition, a pickup in PBoC FX purchases in August suggests CNY appreciation pressures are
building (Figure 3). Reflecting this, in the recent EM FX sell-off, USD/CNY has remained
stable, appreciating almost 4% since 1 May 2013 on a nominal effective exchange rate basis
and outperforming its EM counterparts (Figure 4).
Market sentiment on China will likely continue to be supported through November, in
response to the improving economic momentum that we expect to be reflected in the Q3
data. That suggests USD/CNY will trend lower in the coming weeks. After that, we expect
USD/CNY to continue to move lower as the Chinese authorities use a stronger currency as a
rebalancing tool. However, 2014 will be framed by a stronger USD environment, in our view,
suggesting that the pace of CNY will slow. Furthermore, the CNY has appreciated
significantly this year and on a real effective basis is more than two standard deviations
above its 2010-13 average.
FIGURE 3
Recent portfolio outflows are likely to turn around on
improving economic data
USD bn
120
100
FIGURE 4
CNY outperformed its EM counterparts in the recent selloff
NEER
Index
108
CNY
EM Asia (ex China and India)
EEMEA
LatAm
80
103
60
40
20
98
0
-20
93
-40
-60
-80
Aug-08
Aug-09
26 September 2013
Aug-10
Aug-11
Aug-12
Aug-13
88
May-13
Jun-13
Jul-13
Aug-13
Sep-13
17
An improving China growth outlook has seen AUD/USD rally 5.2% through September,
following a 14% decline during May-August. But in the context of a stronger USD and a fairly
weak outlook for Australian domestic activity, we maintain our view of AUD/USD depreciation
over the coming year. We forecast GDP growth will decline to 2.1% y/y in 2014 from 2.5% this
year. While there are concerns about strong growth in housing finance recently, consumer
spending remains subdued, and last years pickup in non-mining investment has been
unwound. As such, growth in overall bank lending remains low. The labour market also
remains weak, and the unemployment rate has continued to move higher in recent months. In
addition, recent declines in Australian exports to China are concerning (Figure 5), and our
forecasts for Australias commodity prices are fairly mixed (Figure 6). RBA forecasts imply an 810% drop in Australias terms of trade over the next year or so. However, net exports are likely
to provide a partial offset to weaker growth, as previous mining sector investment comes online
(allowing a pickup in mining exports) and mining-related capital imports decline.
Consistent with a weak domestic economic outlook, the RBAs low tolerance for a stronger
currency is an AUD negative, in our view. Concerns about a rapidly recovering housing market
indicate that the central bank is keen to achieve looser financial conditions through a weaker
exchange rate, rather than adding to the 225bp reduction in the cash rate already administered
during this cycle. The RBA would also welcome further AUD weakness to help the economy
rebalance away from resources investment toward other sources of demand, noting in the
minutes of its 3 September policy meeting: Some further decline in the exchange rate would
be helpful in achieving such an outcome. However, if the AUD appreciates further, thereby
tightening monetary conditions, we think the likelihood of a rate cut increases, as the central
bank would likely become increasingly concerned about the downside risks to the non-mining
sector. This factor will limit AUD gains from here, in our view.
The effect of a weak domestic outlook and the RBAs aversion to a stronger currency is
likely to be mostly offset by a pickup in Chinese economic activity and some USD weakness
in the context of Fed tapering being off the agenda until December. This combination will
see AUD/USD broadly flat at a one-month horizon, in our view.
However, we expect this sell-off to become more pronounced towards the end of this year
and through 2014, driven by a stronger USD environment, continued weakness in
Australian economic conditions and slowing Chinese economic activity. We continue to
FIGURE 5
Chinese imports from Australia have declined recently
FIGURE 6
A mixed outlook for Australias commodity prices
10%
120
25
110
22
100
19
90
16
80
13
70
10
Jan-10
60
Jan-11
26 September 2013
Jan-12
Jan-13
5%
Q2
Q3f
Q4f
2014f
0%
-5%
-10%
-15%
Gold (8%)
Aluminium
(5%)
18
Further near-term improvement in Chinese economic activity bodes well for the NZD, in the
context of strong domestic growth and elevated terms of trade. AUD/NZD has declined
about 9% year to date, and we expect this to continue as economic outlooks and
commodity prices diverge further. The RBNZ expects increased consumption and the
reconstruction of Canterbury to drive GDP growth to 3.5% y/y in mid-2014, significantly
higher than our forecast for Australian GDP growth of 2.1% y/y in 2014. A pickup in export
demand from an improving global economy is also likely to contribute to economic activity.
Despite the recent strength in the NZD, export revenues are currently being protected by
high NZ commodity prices, which have increased almost 20% this year in world terms,
while Australias commodity prices are flat year to date.
However, market expectations for RBNZ rate hikes (of about 75bp over next 12 months) are
likely overdone in the context of inflation outcomes below the lower end of the RBNZs
1-3% inflation-targeting band and the recent announcement of macro-prudential measures
to cool the housing market. We do not expect the RBNZ to hike rates until Q2 14, in line
with RBNZ forecasts.
Slowing Australian and Chinese economic growth in 2014, which together take almost 40%
of New Zealands exports, is likely to weigh on the NZD further ahead, in the context of
broad-based USD strength. As such we forecast NZD/USD to reach 75 cents in 12 months.
We do not think a rebalancing of Chinese economic activity away from investment towards
consumption will be an important driver of AUD/NZD. Despite New Zealands large
proportion of agricultural commodity exports relative to Australia, which suggests New
Zealand should benefit to a greater degree from the rebalancing of Chinese growth, we
recently found that the import content of investment and consumption goods in China is
not as large or dissimilar as markets tend to believe (see FX Mid-quarter Update: How does
China matter for FX, 15 August 2013).
26 September 2013
19
THEME: GBP
Against the backdrop of the delay in Fed tapering, stronger UK data and a disappointing
BoE forward guidance framework have boosted GBP recently. We think the good news is
largely priced and expect underlying headwinds to re-emerge, putting downward
pressure on GBP. BoE monetary policy is set to remain loose for far longer than Fed
policy, and GBP weakness related to a rebalancing of the UK economy away from
services/non-tradable sectors toward tradable sectors is as relevant today as in the
post-crisis period. We recommend buying a 6m GBP/USD put spread (1.60 (ATM) vs
1.55) to express our view of a gradual but persistent move lower.
FIGURE 2
Combined with steepening UK rates, this has put pressure on
bearish GBP positions
%
bp
0.25
0.30
25
0.20
0.20
20
0.15
2
1
0.10
0.05
0.00
-0.05
0.00
-1
-0.10
-3
-0.10
-0.15
Jan-13
0
-2
Mar-13
May-13
UK DSI (LHS)
26 September 2013
Jul-13
Sep-13
GBP NEER
15
0.10
10
5
0
-0.20
-5
-4
-0.30
-5
-0.40
Jan-13
-10
-15
Mar-13
May-13
Jul-13
Sep-13
UK 3m2y slope
20
FIGURE 4
GBP/USD spot vs the level implied by monetary policy
expectations (RNFV)
2.30
% potential
GDP
6
2.10
1.90
1.70
0
-2
1.50
-4
1.30
-6
-8
2007
2009
2011
2013
US
26 September 2013
2015
UK
2017
1.10
Jun-05
Jun-07
Jun-09
GBPUSD spot
Jun-11
Jun-13
GBPUSD RNFV
21
FIGURE 6
GVA breakdown by sector in 2012 (% total)
20
18
16
14
12
10
8
6
4
2
0
03
04
05
06
07
08
09
10
11
12
Other
These are relative productivity, terms of trade, net foreign assets and relative government consumption as specified
in our BEER model please see Currency valuation from a macro perspective, June 2011, for more details.
26 September 2013
22
FIGURE 8
Regression of equity sector baskets on the basis of
tradability on market variables
Index
350
300
250
200
d (GBP)
d (FTSE)
GBP (t-1)
Const
T5
0.12
0.71***
2.62
0.22
T4
-0.13
0.75***
0.90
0.20
T2
-0.29***
0.83***
0.14
0.24
T1
-0.24*
1.32***
-0.89
-0.36
T5-T1
0.36**
-0.61***
3.51
0.57
150
100
50
Feb-09
Jan-10
T5
Dec-10
Nov-11
Sep-12
T2
T1
T4
Aug-13
Note: We regress weekly sector returns on the broad market and the GBP NEER,
using data from 2004-07 and construct equally weighted quintile baskets based
on the estimated coefficients on GBP. T5 and T1 represent non-tradable and
tradable sectors, respectively. Source: Bloomberg, Barclays Research
Note: We regress weekly returns of the different basket returns on GBP and FTSE
returns, as well as the GBP level versus the RNFV, in the past week.
*** significant at the 1% level; ** significant at the 5% level; * significant at the
10% level. Source: Barclays Research
We use sectoral data of the FTSE 350 index. We exclude sectors that are composed of fewer than three different
companies to avoid capturing stock-specific drivers. We exclude the financial sectors to minimize the importance of
the financial crisis and its aftermath.
26 September 2013
23
Appendix
FIGURE 9
Sensitivity of FTSE 350 sectors to changes in GBP NEER from 2004 to 2007 (we exclude financial services from our baskets
given their specific role in the crisis)
0.4
T1
0.2
T2
T3
T4
T5
0.0
-0.2
-0.4
-0.6
-0.8
Food consumption
General retail
Oil equipment
Gas
Telecommunications
Chemicals
Household Goods
Media
Aerospace
Support Services
Leisure
Non-life Insurance
Pharmaceuticals
Electronic Equip
Financial Services
Tech Hardware
Beverages
Engineering
Banks
Software
Food Production
Industrial eng
Investment (Fins)
Mining
Construction
Industrial Metals
-1.0
26 September 2013
24
THEME: JPY
Yuki Sakasai
+1 212 412 5652
yuki.sakasai@barclays.com
Shinichiro Kadota
+81 3 4530 5038
shinichiro.kadota@barclays.com
FIGURE 2
Mis-valuation tends to persist with wider rates differential
60
100%
5
JPY undervaluation
40
80%
60%
4
3
20
40%
20%
-20
0%
-20%
-40
Mar-95
-40%
-60%
Sep-12
Dec-12
EUR
Mar-13
GBP
Jun-13
JPY
Sep-13
CAD
Note: 30-day rolling correlation between 1y1y forward rate in the US and in each
country. Source: Bloomberg, Barclays Research
26 September 2013
0
JPY overvaluation
Mar-01
-1
Mar-07
Mar-13
25
FIGURE 3
Japanese equities worth attention in the near term
FIGURE 4
Competitiveness challenge significant for Japan exporters
100
80
60
Diff between
Japan/World
export
growth
Competitiveness
effect
Structural
effect
40
1990-1995
-0.8%
-3.2%
2.4%
20
1996-2001
-4.0%
-4.7%
0.7%
2002-2007
-3.8%
-4.2%
0.5%
2008-2012
-1.6%
-3.5%
2.0%
1990-2012
-2.6%
-3.9%
1.3%
0
-20
-40
-60
Jan-81
Jan-87
Jan-93
Jan-99
Jan-05
Jan-11
26 September 2013
Note: Average over the periods. Source: ComTrade, EcoWin, Barclays Research
26
Jan-97
Jan-04
Jan-11
26 September 2013
FIGURE 6
Further loss of export competitiveness may accelerate
current account deterioration
(% of GDP)
16
14
12
10
8
6
4
2
0
-2
-4
-6
-8
-10
-12
-14
-16
70 75 80 85 90
Households
General govt
Current account
Simulated
95
00 05 10 15
Non-financials
Financials
20
(FY)
27
G10 views
USD
3m
15
6m
We believe the Fed decision to postpone tapering delays, but does not derail, our constructive USD outlook.
We expect these delays to add USD250bn to the Fed balance and, hence, expect the USD to trade sideways
with a downward bias in the near term. We now expect the Fed to start tapering in December and
complete asset purchases in June 2014 and the USD to regain upward momentum into year-end and
beyond as the policy normalization becomes a reality.
12m
10
Our baseline case assumes eventual resolution of US fiscal issues, but significant uncertainty remains and
the risk of negotiations lasting until the last minute and causing temporary disruption in the financial market
is worth attention.
AUD
GBP
JPY
EUR
EUR
3m
10
6m
Since the Fed has been more successful than the ECB in controlling the short end of the yield curve, relative
movement in short rates has supported EUR/USD. However, although we do not expect any aggressive
shifts in policy by the ECB, we expect it to cap any steepening in the rates curve and/or a decline in the
liquidity surplus. As such, we see EUR/USD stuck in a range initially, potentially weakening at the threemonth horizon as the ECB responds to the liquidity tightening with a new LTRO.
12m
5
0
-5
CHF
GBP
JPY
USD
-10
JPY
3m
10
6m
We still believe monetary policy divergence will favour the USD over the EUR in the medium term, though
the pace of depreciation is likely to be relatively slow as the US curve is allowed to steepen only gradually.
We expect a weakening trend to EUR/USD to persist with diverging medium-term prospects implying a
more aggressive ECB versus the Fed. There are euro area events that could pose downside risks to our
forecast profile such as package renegotiations in Portugal, Greece and Cyprus, as well as added political
uncertainty (Italy).
We continue to expect USD/JPY to rise gradually in the medium term, driven by the relative growth and
monetary policy outlook between the US and Japan. However, given the Feds decision not to taper in
September, we look for USD/JPY to rise more modestly than we expected before (i.e., 100 by year-end
versus our previous forecast of 103). We still expect the BoJ to ease further in April 2014 when it publishes
its semi-annual outlook report.
12m
5
0
Japan politics is worth attention as a risk factor in coming months, especially over tax decisions (consumption
tax hike and corporate tax cut), supplemental budget, and structural reforms. Disappointment on these fronts
would likely hurt investor sentiment and weigh on Japanese equities and USD/JPY in the short term.
-5
AUD
GBP
EUR
USD
-10
GBP
3m
15
6m
The markets reaction to the unveiling of the BoEs forward guidance suggests the MPC may struggle to
contain the markets enthusiasm about better cyclical data. The correlated GBP appreciation and selloff in
short rates suggest the market viewed the forward guidance framework as relatively soft and the inclusion
of relatively ambiguous knockouts (since dubbed as thresholds) has raised questions about the central
banks commitment to the framework.
12m
10
5
0
-5
CHF
JPY
EUR
USD
-10
CHF
3m
6m
In a context of the Feds postponement of tightening, the CHF should underperform as risk and carry trades
are tactically re-established over the quarter. USD/CHF,, however is unlikely to see the move higher we had
previously expected in the near term given its sensitivity to moves in front-end US rates. With regard to
domestic policy, while the SNB now anticipates somewhat higher inflation in 2014, it notes there are no
signs of inflation risks and the cap remains the prime policy tool.
12m
-5
-10
-15
GBP
JPY
EUR
-20
USD
Given our relatively bearish view on the UK labour market, we expect monetary policy from the BoE will remain
loose for far longer than the Fed and continue to weigh on the currency. UK rates continue to price tighter
policy than the BoE has told the market and than our economists expect. Short sterling futures currently price
the first hike around March 2015, over 12m before our economists expect action (August 2016). While this
premium in the curve may be partly justified by the improvements in cyclical data, it is inconsistent with the
levels the MPC sees as compatible with the longer-term outlook for growth and inflation.
Given the commitment to the floor and the scope for further unwinds of deposit flows, we view the risks of
the CHF trade as asymmetric over the medium term and like to use it as a funding currency. We would,
however, switch from long USD/CHF positions into long EUR/CHF or CHF funded selective-carry in the near
term, given our view of a relatively range-bound EUR/USD over the coming three months (which defines the
majority of the USD/CHF move).
Note: Charts represent expected return of each currency against major crosses based on our FX forecast. Spot reference as of 25 September 2013.
Source: Barclays Research
26 September 2013
28
G10 views
CAD
3m
15
6m
We remain constructive on the CAD, especially against other commodity currencies due to a less-stretched
valuation, resilient oil prices outlook, a gradual but steady recovery in the Canadian economy and a cyclical
outperformance of the US. Against the USD, we expect it to weaken modestly in the medium term as the
Fed normalizes its policy gradually. A dovish signal from the Fed is near-term positive for commodity
currencies, including CAD, but uncertainty over the US fiscal issues (i.e., continuing resolution and debtceiling) is likely to limit the scope for appreciation.
12m
10
5
0
AUD
JPY
EUR
USD
-5
The BoC is expected to remain firmly on hold until H2 2014 given the modest growth and benign inflation
outlook, while maintaining its guidance that the next move is likely to be a hike, rather than a cut, barring
significant negative shocks to the economy.
AUD
3m
6m
We expect AUD/USD to remain fairly range bound over the coming two months as a weaker USD and
further positive momentum in Chinese economic activity is offset by continued weakness in Australian
economic conditions and the RBAs low tolerance for currency strength. Further ahead, we expect the
AUD/USD to depreciate as the currency responds to the ongoing weakness of domestic activity, slowing
Chinese growth, and a stronger USD.
12m
-5
-10
NZD
JPY
EUR
USD
-15
NZD
3m
6m
Further near-term improvement in Chinese economic activity bodes well for the NZD, in the context of
strong domestic growth and elevated terms of trade. However, market expectations for RBNZ rate hikes (of
about 75bp over the next 12 months) are likely overdone in the context of inflation outcomes below the
lower end of the RBNZs 1-3% inflation-targeting band and the recent announcement of macro-prudential
measures to cool the housing market.
12m
0
-5
-10
AUD
JPY
EUR
USD
-15
SEK
3m
6m
Our analysis suggests the AUD is the most vulnerable to a China growth surprise, encapsulating commodity
and high-beta currency characteristics. Combined with still significant overvaluation (AUD/USD is 12%
overvalued based on our Behavioural Equilibrium Exchange Rate model), we believe these factors will
ultimately weigh on the AUD and maintain our forecast for AUD/USD to reach 0.83 in 12 months time.
We do not expect the RBNZ to hike rates until Q2 2014, in line with RBNZ forecasts. In addition, slowing
Australian and Chinese economic growth in 2014, which together take almost 40% of New Zealands
exports, is likely to weigh on the NZD further ahead, in the context of broad-based USD strength. As such,
we forecast NZD/USD to reach 75 cents in 12 months time.
The Riksbank (RB) remains caught between countering growing financial imbalances and undershooting
inflation. The removal of responsibility over financial imbalances from the RBs mandate (passed over to the
FSA) is likely to be gradual and, until more explicit guidance is provided, it will remain an implicit part of the
RBs reaction function; therefore, policy will remain tighter than the inflation outlook suggests.
12m
4
2
We expect no further cuts this year, however, and instead expect the SEK to trade constructively as a
function of the cyclical upturn in the global (and in particular) the eurozone growth cycle. We therefore
maintain our forecasted downward trajectory in EUR/SEK with the bulk of the SEK appreciation
concentrated beyond the 3m horizon.
0
-2
NOK
JPY
EUR
USD
-4
NOK
Norges Bank (NB) has reacted to the easing in deflationary pressures (which have partly been driven by the
selloff in the currency) by raising its repo rate path guidance. NB seems likely to be one of the first G10
central banks to hike its policy rate next year and domestic conditions are now better placed to warrant NOK
appreciation. However, given significant long NOK positions (particularly in the bond market) a repeat of the
global bond market volatility witnessed in June would likely see NOK underperform, and we expect this
(along with liquidity concerns) to outweigh domestic pull factors, as they have done in Q2.
SEK
12m
EUR
USD
6m
JPY
3m
8
6
4
2
0
-2
-4
-6
We maintain our downward sloping EUR/NOK forecast path in the long term but acknowledge the risks of a
repeat of the liquidity and bond-market driven selloff seen in June and August and see risks of a repeat over
the coming months.
Note: Charts represent expected return of each currency against major crosses based on our FX forecast. Spot reference as of 25 September 2013.
Source: Barclays Research
26 September 2013
29
Major EM views
INR
3m
10
6m
As a high-yielding EM currency, the INR has been a key beneficiary of the recent delay in Fed tapering. Lower
US interest rates for longer, combined with recent initiatives to encourage portfolio inflows, are likely to
reduce concerns about the ability of India to finance its twin current account and fiscal deficits.
12m
That said, the RBIs recent decision to unexpectedly hike interest rates suggests any gains will be capped by
uncertainty regarding future RBI policy. Further ahead, we think weak growth, a lack of RBI stimulus and a
stronger USD will limit the scope for INR appreciation. We recently lowered our forecasts for FY 13-14 GDP
growth to 5.3% from 6% and now think RBI policy easing will be delayed until December.
6
4
2
GBP
JPY
EUR
USD
TWD
3m
6m
Continued momentum in Chinese economic activity is likely to support Taiwanese services exports and the
TWD in the near term. Further ahead, a strengthening USD and slowing Chinese economy in 2014 will likely
cap TWD appreciation.
12m
6
4
2
0
-2
CNY
JPY
EUR
USD
-4
CNY
3m
6m
Continued positive momentum in Chinese economic data, in the context of broad-based USD weakness, is
likely to support a return of portfolio inflows and further appreciation in the CNY this year. While we expect
Chinese growth to slow in 2014, we think Chinese policy makers will encourage continued CNY appreciation
consistent with Chinas medium-term FX liberalisation objectives, which are designed to create a more
efficient model for economic growth.
12m
6
4
However, the pace of CNY appreciation in 2014 will likely slow given a strengthening USD and significant
CNY appreciation to date. On a real effective basis, CNY is more than 2 standard deviations above its 200613 average.
TW
D
JPY
EUR
USD
KRW
3m
6m
We expect the KRW to benefit from a pickup in US economic activity, an increasingly supportive balance of
payments and improving economic growth. Strengthening domestic demand is likely to be underpinned by
a strong labour market and a pickup in electronic exports in response to strong growth in US equipment and
software investment.
12m
6
4
However, expected JPY weakness is likely to limit the degree of KRW appreciation through a perceived loss
of export competitiveness in third markets. Next year, a strengthening USD will also weigh on the KRW.
2
0
CNY
JPY
EUR
USD
-2
MYR
3m
10
6m
A likely return of foreign MGS investors has improved sentiment towards Malaysia in recent weeks and we
expect this to continue to support the MYR in the context of lower US interest rates. Further ahead, the MYR
is likely to be supported by Malaysias robust domestic growth, large current account surplus, and
manageable short-term external debt.
12m
8
6
Our economists forecast GDP growth of 4.8% y/y this year and 5.7% y/y in 2014. In addition, they forecast
Malaysias current account surplus to remain relatively large at 3.7 and 4.6% of GDP in 2013 and 2014,
respectively. As such, we forecast modest appreciation against the USD in 6 and 12 months.
4
2
SGD
JPY
EUR
USD
Note: Charts represent expected return of each currency against major crosses based on our FX forecast. Spot reference as of 25 September 2013.
Source: Barclays Research
26 September 2013
30
Major EM views
SGD
3m
6m
The SGD is currently trading about 100bp above the mid-point of the +/- 2% trading band. Further SGD
appreciation is likely to be limited in the near term by downside economic growth risks and further ahead,
by a strengthening USD in 2014.
12m
6
4
2
0
-2
MYR
JPY
EUR
USD
-4
MXN
3m
10
6m
We still believe that the completion of the governments agenda of structural reforms in Mexico will
translate into a higher level of potential GDP growth and a stronger currency. And while the governments
political capital seems to have weakened, we still think Pea Nieto will be able to get most of the reforms
approved by making concessions to the opposition on the political reforms.
A bout of weak economic data triggered a 25bp cut in the policy rate. We expect Banxico to implement
another 25bp interest rate cut in its next meeting and for the economy to recover its dynamism only toward
the end of the year.
12m
8
6
4
2
CAD
JPY
EUR
USD
Given that aggregate uncertainty is likely to remain elevated in the near term and the less MXN-supportive
domestic environment, we expect the currency to continue exhibiting relatively elevated two-way volatility.
Because of the limited room for spot appreciation and the MXNs unattractive carry, we remain MXNneutral waiting for a better trading environment or a selloff to re-engage with long positions.
BRL
3m
6m
From a fundamental mid-term perspective, we continue to expect the BRL to weaken relative to the USD
given the countrys limited growth, investors negative sentiment, and a combination of monetary and fiscal
policy that is likely to trigger a sovereign credit downgrade early in 2014.
12m
However, the BCBs decision to implement a USD 60bn program of currency intervention will in all likelihood
contain the BRLs volatility and all but eliminate the risks of the real gaping downwards. Given Brazils very
attractive FX-implied yields we are no longer short the BRL but neutral and recommend that investors
holding BRL exposure not hedge their currency risk in the very short run.
-5
-10
AUD
JPY
EUR
USD
-15
RUB
3m
6m
We remain positive for RUB against the basket and other high yielding currencies. Russia scores well on the
external financing front with current account surplus and large FX reserves, and the relatively high carry
should keep the RUB well supported. The sluggish growth is likely to elicit some counter-cyclical macro
measures, but we do not believe this would be sufficient to weaken the RUB, particularly as oil prices remain
well supported by global supply factors and a likely lower-for-longer US monetary policy.
12m
4
2
0
-2
GBP
JPY
EUR
USD
-4
ILS
3m
12
6m
We are bullish the shekel over the medium term. Interventions have not succeeded in turning around the
currency, suggesting to us that the policy bias is to control the appreciation rather then turn the currency
around. The countrys widening current account surplus and strengthening net foreign assets position
mean a strong balance sheet will support the shekel, even when global financial conditions re-tighten. We
recommend being long ILS against the EUR.
12m
10
8
6
4
2
GBP
JPY
EUR
USD
Note: Charts represent expected return of each currency against major crosses based on our FX forecast. Spot reference as of 25 September 2013.
Source: Barclays Research
26 September 2013
31
Major EM views
PLN
3m
6m
The PLN is one of our favored longs. The monetary easing cycle has likely reached an end, and the Polish
government is looking to take new fiscal steps to support investment in the country and have better access
to EU funds. This could mean stronger cross-border inflows, investment and higher growth (in 2014). Last
but not least, Polands widening current account surplus increases its resilience to volatility in EM flows.
12m
4
2
0
-2
CZK
JPY
EUR
USD
-4
ZAR
3m
6m
South Africas external financing needs surrounding the twin deficits and the deteriorating terms of trade on
relatively lower Chinese growth are the two major challenges for the ZAR, in our view. Although domestic labor
unrest has recently settled down, we note the risk of increasing political uncertainty going into next years
general elections. We also think that the monetary policy will not be in favor of the ZAR as the central bank is
unlikely to hike interest rates until late 2014 as inflation pass-through so far seems to be relatively low.
12m
0
-2
-4
GBP
JPY
EUR
USD
-6
HUF
3m
6m
We are neutral on the HUF. Although the current account surplus is widening, substantial deleveraging and
external debt repayment flows are putting downward pressures on reserves. The government is considering
new options to extricate households from their FX-linked loans, which is likely to lead outflows and
currency negative. That said, we expect NBH to try to keep the HUF stable against the EUR, at least until the
bailout program for FX mortgages is in place.
12m
0
-5
-10
PLN
JPY
EUR
USD
-15
TRY
3m
6m
We expect a drop in lira volatility along with broader EM FX trends; however, this may be met with a drop in
the liras carry but not spot appreciation. Higher external funding needs and the already-large stock of
external debt of the private sector (net FX exposure of the non-bank corporate sector) are the major
sources of pressure for the lira. Moreover, the central banks hesitance to hike rates to defend the lira and
instead its allowance of some depreciation to support growth puts additional downside pressure on the lira
as well.
12m
6
4
2
0
-2
GBP
JPY
EUR
USD
-4
CZK
3m
6m
We recommend staying short CZK in the coming months. The economic recovery in the Czech Republic
remains fragile, and while CE exports are likely to firm, they may not be strong enough to give GDP growth a
meaningful boost. Meanwhile, inflation is low and in early 2014 there is risk of zero inflation or deflation. We
think these factors increase the likelihood of FX intervention.
12m
2
0
-2
-4
PLN
JPY
EUR
USD
-6
Note: Charts represent expected return of each currency against major crosses based on our FX forecast. Spot reference as of 25 September 2013.
Source: Barclays Research
26 September 2013
32
Trade/date/macro views
Long EUR/CZK spot, 11/12/2012
Spot
reference
% of
notional
Mark to market
Expiry
25.26
Current
spot reference
Net profit
since
inception
25.83
+2.25%
Profit
change
(since
15/08)
Initial rationale: The risk of intervention remains high, as prices in the Czech Republic may head towards deflation territory and the cyclical growth
recovery is muted.
Long USD/CHF spot, 21/03/2013
0.9466
0.9115
-3.70%
-2.96pp
Initial rationale: This trade performs under our base case of USD strength and manageable euro area risks. With EUR/CHF still floored at 1.20, there is
limited downside on any serious re-emergence of peripheral risks.
Short basket of ZAR and TRY against a basket of MXN
and PHP, stop-loss: 97 and target: 105, 18/06/2013
USDZAR: 9.9916
USDTRY: 1.8863
USDMXN: 12.8955
USDPHP: 43.115
USDZAR: 9.9916
USDTRY: 1.8863
USDMXN: 12.8955
USDPHP: 43.115
+1.59%
+1.24pp
Initial rationale: We are cautious of currencies that might suffer from an inability to borrow from abroad after a period in which above-average yields have
led them to depend on foreign financing. We recommend positioning this against currencies with positive reform stories such as the MXN and PHP.
Long 6m GBP/USD put spread (1.60 vs 1.55),
1.05%
25/3/14
1.6050
25/9/2013
Initial rationale: We believe current levels offer a good opportunity to establish a medium-term view of a gradual but persistent move lower.
Short EURPLN spot, target 4.05, stop 4.25, 25/9/2013
4.22
4.22
Initial rationale: We believe the economy is stabilising, driven by euro area demand for exports, which is likely to be joined by fiscal easing.
Long EUR/CHF, stop-loss 1.1990, target 1.2600,
1.2300
1.2300
25/09/13
Initial rationale: We recommend going long EUR/CHF spot on reduced fragmentation risks and significant scope for unwinds of legacy long CHF
5.72
Initial rationale: China growth is expected to remain under pressure, despite the recent bounce-back in data. CNY appreciation will continue to be
used as a tool for rebalancing (towards consumption), while lower investment and growth should weigh on the AUD.
26 September 2013
33
Spot reference
Cost as %
of notional
Closed on
Closing spot
Profit as a %
of notional
82.90
28.90%
14/06/2012
79.2650
0%
GBP/USD: 1.5812
USD/JPY: 82.46
-0.80%
22/06/2012
GBP/USD: 1.5559
USD/JPY: 80.4950
-0.69%
XAU/EUR: 1081.58
EUR/CHF FVA: 11.9%
25/06/2012
XAU/EUR: 1271.58
EUR/CHF FVA: 6.30%
+17.85%
79.06
0%
28/06/2012
80.2050
0%
CAD/EUR: 0.7111
CAD/GBP: 0.6267
10/07/2012
EUR/CAD: 1.2526
GBP/CAD: 1.5804
+6.58%
80.17
1.95%
23/08/2012
79.0820
0%
1.3024
0.30%
23/08/2012
1.2840
+0.47%
GBP/USD: 1.5583
USD/CHF: 0.9660
-1.77%
30/08/2012
GBP/USD: 1.5812
USD/CHF: 0.9609
+0.70%
1.0257
-0.23%
30/08/2012
0.9924
+0.63%
9.1895
27/09/2012
8.4244
+12.12%
0.8388
27/09/2012
0.9398
+11.03%
96.37
0%
16/10/2012
102.94
0%
2.4984
0.86%
16/10/2012
2.6549
0%
1.2441
1.36%
29/11/2012
1.2979
-1.36%
6.3360
7/12/2012
6.0701
+5.31%
1.2580
0.58%
23/11/2012
1.2959
-0.58%
1.2952
1.97%
14/11/2012
1.2729
-0.23%
79.65
0.0%
20/11/2012
81.74
+0.42%
23.1723
23/11/2012
23.8198
+2.76%
1.2913
-4.25%
27/12/2012
1.3222
+0.50%
354.9
03/01/2013
350.0
-1.38%
6.25
0.09%
18/01/2013
6.2181
-0.51%
79.89
1.12%
01/02/2013
92.07
+11.45%
13.0853
2.07%
01/02/2013
12.6062
-2.07%
1.6126
0.085%
04/02/2013
1.5711
+1.90%
89.62
0.72%
21/02/2013
93.17
+2.41%
1.003
0.45%
22/02/2013
1.0215
-0.45%
3.7800
01/03/2013
3.8300
+1.54%
132.11
0.88%
07/03/2013
142.6030
+3.75%
0.9170
0.47%
11/03/2013
0.9509
+0.85%
1.2366
0.22%
18/03/2013
1.2582
+0.89%
219.8156
21/03/2013
181.53
-17.42%
0.8190
21/03/2013
0.8518
-3.90%
130.75
12.80%
21/03/2013
144.28
-5.70%
AUD/CAD: 0.9990
CAD/SEK: 7.0270
21/03/2013
AUD/CAD: 1.0690
CAD/SEK: 6.3321
-10.87%
26 September 2013
34
Spot reference
Closed on
Closing spot
Profit as a %
of notional
EUR/GBP: 0.7978
EUR/NOK: 7.5229
21/03/2013
EUR/GBP: 0.8518
EUR/NOK: 7.5463
-2.43%
EUR/NOK: 7.5000
CAD/JPY: 78.30
21/03/2013
EUR/NOK: 7.5463
CAD/JPY: 92.8987
+8.21%
EUR/ZAR: 10.44
JPY/CLP: 6.2100
21/03/2013
EUR/ZAR: 12.0342
JPY/CLP: 4.9682
+7.22%
1.8270
0.11%
21/03/2013
1.8180
-0.11%
92.72
1/04/2013
93.30
+0.63%
RUB/EUR: 0.0251
USD/RUB: 30.8610
4/04/2013
RUB/EUR:0.0245
USD/RUB: 31.1766
-1.70%
93.31
0.91%
1/05/2013
97.20
+1.87%
1.0698
0.75%
3/05/2013
1.0344
+1.00%
USD/MYR : 3.1354
0.37%
9/05/2013
2.97
-0.98%
1.5059
0.22%
08/04/2013
1.5313
-0.22%
6.48
03/06/2013
7.8764
+22.29%
610 pips
12/06/2013
6.1432
-1.48%
3.013
23/05/2013
3.05
-1.33%
6.02
31/05/2013
5.60
+7.27%
0.9192
6/20/2013
0.8585
-6.804%
98.95
3/6/2013
99.80
+0.86%
1.5164
14/6/2013
1.5679
-3.40%
1.3225
11/7/2013
1.3100
+0.95%
97.44
22/7/2013
99.50
2.11%
3.5909
6/8/2013
3.5500
-1.14%
0.921
8/8/2013
0.905
+1.74%
11.45
26/7/2013
11.7
-2.18%
0.25%
18/7/2013
-0.25%
0.0978
18/7/2013
0.1013
+3.58%
1.3066
26/7/2013
1.3275
-1.60%
46.6128
0%
18/7/2013
47.09
0%
10.05%
22/08/2013
7.92%
-2.13%
1.4892
0.52%
5/09/2013
1.5526
-0.52%
1.3266
20/08/13
1.3450
-1.39%
4.26
22/08/13
4.23
+0.70%
1119.40
ATM vol: 7.24%
0%
26/09/2013
0%
1.4428
22/08/2013
1.467
-1.89%
687.288
08/09/2013
670
-2.54%
1.5599
0.29%
29/8/2013
1.5507
+0.05%
26 September 2013
35
FORECAST TABLES
Forecasts
Spot
1 Month
3 Month
6 Month
1 Year
1 Month
3 Month
6 Month
1 Year
EUR/USD
1.35
1.35
1.32
1.30
1.27
-0.2%
-2.4%
-3.9%
-6.2%
USD/JPY
98
98
100
102
105
-0.4%
1.6%
3.7%
7.0%
GBP/USD
1.61
1.59
1.57
1.55
1.53
-1.1%
-2.3%
-3.5%
-4.6%
USD/CHF
0.91
0.92
0.95
1.00
1.06
1.2%
4.6%
10.2%
17.1%
USD/CAD
1.03
1.03
1.03
1.04
1.05
-0.2%
-0.3%
0.4%
0.9%
AUD/USD
0.94
0.94
0.89
0.86
0.82
0.5%
-4.4%
-7.1%
-10.4%
NZD/USD
0.82
0.82
0.79
0.77
0.75
-0.4%
-3.6%
-5.4%
-6.5%
EUR/JPY
133
132
132
133
133
-0.9%
-0.9%
0.0%
0.1%
EUR/GBP
0.84
0.85
0.84
0.84
0.83
1.0%
-0.2%
-0.3%
-1.7%
EUR/CHF
1.23
1.24
1.26
1.30
1.35
0.9%
2.5%
5.9%
10.1%
EUR/SEK
8.68
8.60
8.50
8.40
8.30
-1.0%
-2.3%
-3.7%
-5.3%
EUR/NOK
8.12
8.00
8.10
8.20
7.70
-1.6%
-0.6%
0.2%
-6.6%
USD/CNY
6.12
6.10
6.08
6.07
6.05
-0.8%
-1.2%
-1.5%
-2.3%
USD/HKD
7.75
7.76
7.76
7.76
7.76
0.1%
0.1%
0.1%
0.1%
USD/INR
62.42
62.00
61.00
61.00
61.00
-0.8%
-4.7%
-6.5%
-9.6%
USD/KRW
1077
1065
1065
1070
1070
-1.1%
-1.5%
-1.5%
-2.1%
USD/SGD
1.25
1.25
1.25
1.26
1.26
-0.4%
-0.4%
0.5%
0.5%
USD/TWD
29.57
29.50
29.75
29.75
29.75
-0.1%
1.0%
1.4%
2.0%
USD/BRL
2.23
2.25
2.35
2.40
2.45
0.4%
3.5%
3.7%
1.6%
USD/MXN
13.00
12.80
12.78
12.75
12.70
-1.8%
-2.4%
-3.3%
-5.0%
EUR/CZK
25.82
25.75
25.75
25.75
25.25
-0.3%
-0.2%
-0.2%
-1.9%
EUR/PLN
4.22
4.20
4.16
4.12
4.05
-0.6%
-1.9%
-3.3%
-6.0%
USD/RUB
32.05
32.00
32.00
32.00
33.00
-0.7%
-1.8%
-3.2%
-2.9%
BSK/RUB
37.13
37.04
36.61
36.32
37.01
-0.8%
-2.9%
-4.9%
-5.5%
USD/TRY
2.01
1.95
1.95
1.98
2.05
-3.6%
-4.6%
-4.8%
-4.9%
USD/ZAR
9.98
9.90
10.10
10.30
10.50
-1.2%
-0.1%
0.6%
-0.2%
NOK
NZD
EUR
USD
AUD
vs EUR
0%
-8%
16%
vs USD
8%
0%
24%
CAD
CHF
GBP
JPY
SEK
2%
14%
-8%
-13%
-10%
1%
25%
10%
22%
0%
-5%
-2%
9%
33%
Note: Daily updates for this table are available on Barclays Live: https://live.barcap.com/BC/barcaplive?menuCode=MENU_FI_FX_GLB_FXH.
Source for all tables: Barclays Research
21%
RUB
HUF
0%
EUR
19%
-1%
TWD
17%
13%
PHP
-1%
CNY
12%
CHF
-2%
DKK
MXN
SGD
10%
-6%
15%
10%
BRL
TRY
-6%
SEK
GBP
15%
9%
VEF
-8%
MYR
CZK
7%
CAD
-9%
KRW
NZD
5%
PLN
-9%
IDR
14%
2%
THB
-10%
HKD
-15%
INR
NOK -20%
-50%
JPY -28%
-30%
ZAR -28%
-10%
14%
2%
CLP
10%
ILS
1%
30%
AUD
1%
USD
RON
50%
30%
Note: Spot data are as of 25 September 2013. For the details of our BEER model, see Currency valuation from a macro perspective, 14 June 2011.
Source: Barclays Research
26 September 2013
36
Spot
1 Month
3 Month
6 Month
1 Year
1 Month
3 Month
6 Month
1 Year
USD/IDR
11480
11500
12000
12250
11750
-1.1%
USD/MYR
3.22
3.15
3.15
3.17
3.18
-2.2%
0.9%
0.9%
-7.0%
-2.5%
-2.4%
USD/PHP
43.41
42.75
42.75
43.00
43.00
-1.1%
-0.9%
-2.9%
-0.4%
-0.5%
USD/THB
31.25
31.00
31.25
31.50
32.00
-0.8%
-0.4%
-0.1%
0.5%
USD/ARS
5.77
5.84
6.02
6.46
7.37
-2.0%
-10.1%
-15.7%
-18.7%
USD/COP
1893
1895
1900
1920
1930
-0.1%
-0.3%
0.0%
-1.0%
USD/CLP
501
505
510
518
525
0.4%
0.5%
0.9%
0.2%
USD/PEN
2.76
2.75
2.76
2.80
2.85
-0.8%
-1.0%
-0.5%
0.0%
EUR/HUF
299
297
295
295
310
-1.0%
-2.1%
-2.7%
1.1%
EUR/RON
4.45
4.42
4.38
4.34
4.30
-1.0%
-2.3%
-3.7%
-6.0%
USD/ILS
3.55
3.50
3.50
3.47
3.40
-1.5%
-1.6%
-2.6%
-4.7%
USD/EGP
6.89
6.85
6.78
6.67
6.52
-0.8%
-4.1%
-9.5%
-18.7%
Long-term FX forecasts
18 Month
2 Year
3 Year
4 Year
5 Year
1.27
1.26
1.26
1.25
1.25
EUR
JPY
104
103
102
101
100
GBP
1.51
1.48
1.49
1.51
1.56
CHF
1.09
1.11
1.12
1.12
1.11
CAD
1.04
1.02
1.04
1.05
1.07
AUD
0.83
0.83
0.80
0.79
0.78
0.67
NZD
0.73
0.72
0.70
0.69
EUR/JPY
131
130
128
126
124
EUR/GBP
0.82
0.82
0.81
0.81
0.80
EUR/CHF
1.36
1.36
1.37
1.38
1.38
EUR/SEK
8.25
8.21
8.16
8.11
8.07
EUR/NOK
7.73
7.75
7.78
7.80
7.83
1Q 14
2Q 14
3Q 13
4Q 13
0-0.25
0-0.25
0-0.25
0-0.25
0-0.25
BoJ
0.10
0-0.10
0-0.10
0-0.10
0-0.10
MPC
0.50
0.50
0.50
0.50
0.50
ECB
0.50
0.50
0.50
0.50
0.50
Riksbank
1.00
1.00
1.00
1.00
1.00
Norges Bank
1.50
1.50
1.50
1.50
1.50
SNB
0-0.25
0.25
0.25
0.25
0.25
BoC
1.00
1.00
1.00
1.00
1.25
RBA
2.50
2.50
2.50
2.50
2.50
RBNZ
2.50
2.50
2.50
2.50
2.50
26 September 2013
37
Global FX
Koon Chow
Head of EM Strategy
+44 (0)20 777 37572
koon.chow@barclays.com
Aroop Chatterjee
Head of FX Quantitative Strategy
+1 212 412 5622
aroop.chatterjee@barclays.com
Sebastian Brown
FX Strategist, Latin America
+1 212 412 6721
sebastian.brown@barclays.com
Durukal Gun
EM/FX Strategist
+44 (0)20 313 46279
durukal.gun@barclays.com
Shinichiro Kadota
FX Strategy
+81 3 4530 1881
shinichiro.kadota@barclays.com
Michael Keenan
South Africa/Sub-Saharan
FX Strategist
+27 (0) 11 895 5513
mike.keenan@absacapital.com
Hamish Pepper
FX Strategist, Asia-Pacific ex-Japan
+65 6308 2220
hamish.pepper@barclays.com
Yuki Sakasai
FX Strategy
+1 212 412 5652
yuki.sakasai@barclays.com
Chris Walker
FX Strategy
+44 (0) 20 3555 5863
chris.x.walker@barclays.com
Nick Verdi
FX Strategist, Asia-Pacific ex-Japan
+65 6308 3093
nick.verdi@barclays.com
26 September 2013
LAST PAGE
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