FX Strategy

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May 6, 2011 - Nordea. Barclays Currency Index. MS. Year. JAN. FEB. MAR. APR ... Nordea G10 Carry Index is seeking value from investing in high yield ...

FX Strategy G10 Weekly Global Alpha Strategy, 6 May 2011

Key Focus Stay long INFLATION…..……………. ……….……1

Major Focus SEK - downside risks looming ………….……..........2

Tactical Trading

Chart of the Week Long Brent versus copper is a commodity spread that has performed well in recent selloff. 500

400 Copper Brent Spread

300

……………………...….……………...……...…....….3 200

Nordea G10 Carry Index Long AUDUSD.……….........……….………….….....4

100

0

Central Bank Watch Meeting Calendar …………………….…..…..….........5 What’s priced in? …. .………………………...….…...6

Forecast and Forward monitor …………………..……. ……………….….….…..…..7

-100 88 90 92 94 96 98 00 02 04 06 08 10 12

G10 Heat Map Ccy EURUSD USDJPY

Fair value

EURGBP

Retreat towards equilibrium….………….….….…..…..9

AUDUSD

Volatility

USDCAD

………………………...…..…...……………..…..…...10

NZDUSD

Correlation Tracker

EURNOK

EURCHF

EURSEK

…………………………………….………………….11

Seasonality ………………………………………....……..............13

Technical Analysis ……………………………………………….…….....14

CADCHF GBPCAD NOKSEK AUDCHF CHFNOK NOKSEK CADSEK

G10 Calendar

EURAUD

……………………………………….………….…....16

AUDNZD NZDCHF

Tactical

Technical

Macro

Carry

J J J J J J J N J P P N J N N P P N P

J J N J P J J J -

P N P P N N P J J N J J J P J N N P N

J J J N J J J J J J J J J J J J J J J

Key Focus Chart of the Week Stay long INFLATION With growth globally surprising on the downside and inflation continue to come in on the upside we stay long our 2011 strategic theme INFLATION by being long precious versus industrial metals. The selloff in risky assets that followed the ECB surprise truly demonstrates how leveraged and stretched the markets have been, a looser than expected monetary policy should fuel risky assets, however this time it seemed like the market needed a central banker to interpret the latest negative prints of economic indicators. Another commodity based strategy theme that has gained some momentum lately and performed in the recent selloff is being long Brent versus copper. Given that the spread has contracted below long term average we see current levels as a good point of taking profit. But for now, all eyes are on NFP where our off-consensus call is +240k, given current market sentiment a print not even close to that is enough for a positive reaction. Stretched markets The dollar rebound following the lesser-hawkish-than-expected Trichet is unlikely to be the start of the longer lasting trend. Instead the selloff in EUR vs. USD (FX and rate differential) is likely to have been fueled by major short coverings following record large speculative positions in EUR-longs / USD-shorts. As mirrored in our EURUSD long-term forecast we see a broad dollar rebound, but for a movement like this to get traction the market needs to get confident with Fed succeeding in its “dual mandate” and start to price in higher US rates. Despite some negative employment prints out of the US this week we still expect the long-term declining trend in US employment to remain (fig 2). All in all, the EURUSD selloff is not likely the start of the new trend, rather a correction and we see range trading and even some upside risk in the EURUSD on the short term horizon. Struggling UK PMI print after PMI print continues to weigh on the outlooks of the UK economy / sterling and calls for an early hike are more and more muted. We continue to stress the downside risks in cable and stay short GBPCAD in the tactical portfolio. At the same time inflation shows no mercy; today’s higher than expected PPI print suggests the UK economy to be on the edge of stagflation. RBA to the rescue The timing of the hawkish statement form RBA could not have been better. Whereas the central bank revising higher its inflation forecasts was no surprise the timing truly underpinned the battered AUD; we continue to be long AUD versus single currency in the tactical portfolio. CNY -reval Yuan remains in focus in next week’s strategic talks between China and the US and the appreciation pace of the Chinese currency will be one of the biggest disagreements, however we stay long the CNY basket but our beliefs in a stronger yuan is more based on the indication that Beijing will use the currency to fight inflation rather than a result of diplomatic pressure.

Fig 1 – Short copper vs Brent curde has performed well in recent selloffs. 500

400 Copper Brent Spread

300

200

100

0

-100 88 90 92 94 96 98 00 02 04 06 08 10 12 14

Fig 2 – Main direcion in US unemplyment is DOWN despite some disappointing numbers lately.

Fig 3 – AUDUSD vs LME Copper.

Fig 3 – Stay long the CNY reval strategy, initiated Jun 3rd 2010.

110 108

CNY Reval Strategy

106 104 102 100 98 Jan

Apr

Jul

Oct

Dec

Mar

1

Major Focus: SEK - downside risks looming The re-bound in the Swedish economy has been solid and the current situation is bright, with strong GDP and employment growth and healthy public finances. There are simply few clouds on the Swedish sky for the time being and accordingly the central bank is in hiking mode and likely to tighten further.

Fig 1 – Wider margins add to the tightening… 300

6.0

3mth lending vs risk-free rate repo rate, rhs

250

5.0 4.0

200

However, we would like to point out that a scenario also exist where the combination of policy tightening and wider bank margins could be a threat to the generally bright and friction free consensus outlook for the years to come. The structural evolution of debt and real estate prices, for instance, suggests that the response from policy tightening could be more pronounced this time and that the peak in rates lower: (i)

(ii)

Households have been spoiled by abnormally low rates and bank margins for a long while. The repo rate has averaged 2.50% in the past 10yrs, well below what the central bank consider being the neutral rate around 4%. In addition, bank margins have been abnormally tight for several years but have now increased substantially (fig 1) Household debt has grown significantly above trend for a long time and outgrown disposable income (fig 2). Debt/income ratios don’t look alarming from an international perspective, but tighter conditions will bite harder

(iii) Household’s rate sensitivity has increased substantially, as the proportion of total debt running at variable rate is close to 60%, compared with 20% in the beginning of 2000, and the past decades average of 38% (iv) House-prices have appreciated significantly, by around 150% in real terms since 1995 So, obviously we have experienced a big change in behavior over the course of the past decade, with quite a few structural variables having shifted to levels never seen before. Most of these variables are also strongly linked with private consumption, which is important for GDP and employment etc. As such, one needs to acknowledge the risk that a tighter policy could leave faster and harder marks than we have been used to. The recent slowdown and disappointment in retail sales could potentially be an early impact of higher rates (fig 3) and the long-run relationship between private consumption growth and household interest rate costs is clearly there (fig 4). Looking at the forecast in figure 4, which is built on the existing stock of debt, current bank margins and the Riksbank repo path, the outlook for consumption growth looks a bit worrying. A set-back anything like this clearly got the potential to influence the current consensus outlook negatively. If it also would coincide with a correction in real estate/asset prices (consumer confidence is highly correlated with asset prices), the impact will of course be greater. Given these risks and a recently softer-than-expected central bank, one have to wonder if the degree of decoupling priced into FX markets make sense?

3.0 150

2.0

100

1.0

50 2000

0.0 2002

2005

2008

2010

Fig 2 – Household debt vs. disposable income

3000 2500

Disposable income Household debt

2000 1500 1000 500 0 Jan 70

Sep 83

May 97

Jan 11

Fig 3 – Signs of consumption weakness 10%

15%

8% 10%

6% 4%

5%

2% 0%

0%

-2% -4%

-5% -10% Jan 91

Retail Sales, y/y Household consumption, y/y, rhs Jun 96

Dec 01

-6%

-8% Nov 12

Jun 07

Fig 4 – Interest rate costs and private consumption 10.0% 8.0%

Household consumption y/y% Interest rate costs, bn, rhs, reversed Forecast

20 40

6.0%

60

4.0% 2.0%

80

0.0%

100

-2.0%

120

-4.0%

140

-6.0% -8.0% Jan 86

Jun 91

Dec 96

Jun 02

Nov 07

160 May 13

2

Tactical Trading Establish a long USD Over the last week we have taken profits in short CADCHF and long CHFNOK in recent selloffs of risky assets and turned our portfolio slightly long USD by going long USDTRY. As for SEK we stay neutral for now. Open Trades Cross

Long / Short

Current

Initial

Profit Level

Loss Level

Date

In the Money

EURSEK

LONG

9.0207

8.8230

9.2

8.7

23-Feb-11

2.24%

GBPCAD

SHORT

1.5810

1.5793

1.5

1.62

01-Mar-11

-0.11%

NOKSEK

LONG

1.1359

1.1372

1.2

1.1048

28-Mar-11

-0.12%

CADSEK

SHORT

6.4190

6.4350

6

6.69

15-Apr-11

0.20%

EURAUD

SHORT

1.3600

1.3596

1.29

1.4

05-Apr-11

-0.15%

CADZAR

SHORT

6.9762

6.9900

6.6

7.25

27-Apr-11

0.22%

AUDNZD

LONG

1.3579

1.3580

1.4

1.335

29-Apr-11

-0.07%

NZDCHF

SHORT

0.6850

0.6940

0.65

0.7165

03-May-11

1.30%

TRY

LONG

1.5444

1.5471

1.62

1.495

06-May-11

-0.17%

Track Record (since 1/1-2007)

Year 2007 2008 2009 2010 2011

JAN 0.53 -0.75 -0.77 0.00 -0.30

Portfolio return vs a Beta Currency Index

Since Trades Activated # Days Down # Days Up Average Days in Trade

271 637 14

Average USD Down Average USD Up Ratio Win/Lose (days) Gain to Loss Ratio (USD)

-30078 53757 2.4 1.8

Max Monthly Down (%) Max Monthly Up (%)

-2.06 3.54

Daily Marked-to-Market Monthly Information Ratio Weeky Information Ratio Daily Information Ratio % Losing Months

0.48 0.25 0.12 31%

Realized P/L Sharpe Ratio

1.23

FEB 1.21 1.18 -0.48 1.12 -0.31

MAR 0.39 2.52 0.95 3.54 -0.35

APR 0.09 0.00 0.67 2.40 0.51

135 130 125 120 115 110 105 100 95

MAY 0.88 0.00 -2.07 1.11

90 Jan-07

Oct-07

Nordea

JUN -0.30 0.00 1.46 -0.51

JUL 0.45 0.69 0.67 0.12

AUG 0.12 3.34 -0.71 -0.03

SEP 0.83 2.65 1.32 0.94

Jul-08

Apr-09

Jan-10

Barclays Currency Index

OKT 0.54 0.53 1.89 -1.13

NOV 2.75 -0.22 -1.21 -0.91

DEC 0.95 2.40 0.99 -0.33

Oct-10

MS

Year Return 8.44 12.34 2.72 6.34 -0.44

3

Nordea G10 Carry Index Struggling in recent selloff The index has rolled into long AUDUSD and exited AUDCHF, index performance over the last week has been -1.31%. Nordea G10 Carry Index Nordea G10 Carry Index is seeking value from investing in high yield currencies by funding in low yield currencies. The index buys maximum three high yield currencies and sells maximum three low yield currencies. The index is long carry only if i) risk aversion is appropriate and ii) momentum is in favor, otherwise exposure is flat, suggesting carry is never to be reversed. Weights are updated on daily basis (Swedish business days). The index strategy has been optimized and back tested using 9 years of data, including about 2500 trading days. Results of the back tests are presented below.

Performance of Nordea G10 Carry Index since start in 2010

Evolvement of correlation based risk index since start in 2010

115

70

113

60

111

50

109

40

107

30

105

20

103

10

101 99 Jan

0 Apr

Jul

Oct

Jan

Apr

8.0%

Information Ratio

0.96 -3.1%

67%

Max Monthly Drawdown

-3.4%

33%

Jan

Apr

0% NOK

SEK

NZD

-1.9%

CAD

Max Quarterly Drawdown

-100%

AUD

-3.1%

CHF

-67%

1.66

GBP

5.6%

Information Ratio

JPY

Annualized Volatility

USD

-33%

Max Monthly Drawdown

Long

EUR

2002-2010 9.3%

Profitable Months

Oct

100%

Max Weekly Drawdown

Annualized Return

Jul

10.4%

Annualized Volatility

Results from back test

Apr

Current positioning

Preformance since 2010 Cumulative Return

Jan

Short

69%

* Information Ratio is calculated as annualized return over annualized volatility.

4

Central Bank Watch – Meeting Calendar What's priced in, 1yr (bps) Last week 105

96 91

94 88 76

73 58 6057

51

83 72

51 38 26

35

28

BoJ

NB

RIX

SNB

RBA

RBNZ

BoE

BoC

1 3 FED

Note: “What’s priced in over 1y” looks at 1m/Xm fwd OIS and STINA rates (X=1, 2… to 12).

150 140 130 120 110 100 90 80 70 60 50 40 30 20 10 0

ECB

All over the markets less monetary tightening is currently priced in compared with one week ago. Especially the expectations from G2 central banks have come down significantly.

Source: Bloomberg

ECB

FED

BoC

BoE

RBA

RBNZ

SNB

BoJ

RIX

NB

07 Jul 11 04 Aug 11 08 Sep 11 06 Oct 11 03 Nov 11 06 Dec 11 06 Jan 12 06 Feb 12 06 Mar 12 06 Apr 12 ---

23 Jun 11 21 Sep 11 03 Nov 11 14 Dec 11 26 Jan 12 16 Mar 12 28 Apr 12 ------

31 May 11 19 Jul 11 07 Sep 11 25 Oct 11 06 Dec 11 18 Jan 12 01 Mar 12 12 Apr 12 -----

09 Jun 11 07 Jul 11 04 Aug 11 08 Sep 11 06 Oct 11 10 Nov 11 08 Dec 11 13 Jan 12 10 Feb 12 10 Mar 12 07 Apr 12 --

08 Jun 11 06 Jul 11 03 Aug 11 07 Sep 11 05 Oct 11 01 Nov 11 06 Dec 11 01 Feb 12 01 Mar 12 06 Apr 12 04 May 12 --

09 Jun 11 28 Jul 11 15 Sep 11 27 Oct 11 08 Dec 11 26 Jan 12 08 Mar 12 26 Apr 12 -----

16 Jun 11 15 Sep 11 15 Dec 11 17 Mar 12 ---------

21 May 11 15 Jun 11 13 Jul 11 06 Aug 11 08 Sep 11 08 Oct 11 28 Oct 11 17 Nov 11 22 Dec 11 08 Apr 12 29 Apr 12 --

05 Jul 11 07 Sep 11 27 Oct 11 20 Dec 11 15 Feb 12 18 Apr 12 -------

12 May 11 22 Jun 11 10 Aug 11 21 Sep 11 19 Oct 11 14 Dec 11 26 Jan 12 16 Mar 12 -----

5

Central Bank Watch – what’s priced in? USD 0.25

EUR 1.25 +75

+40 +30

+20

+20 +10

+8

+5

+3

-

+13

+13

+41

+1

+5 Jun 11

Jul 11

Sep 11 Nov 11 Dec 11 Last week

Feb 12

Apr 12

+80

+70

+60

+58 +46

+40

+33

+20

+18

+9

+4

May 11

Jul 11

Oct 11 Last week

Jan 12 BoC

Apr 12

AUD 4.75 +31

+30 +25 +20

+17

+15

+20

+21

+21

+13

+10

+7

+5

+9

+3

-

Mar 11 May 11 Jun 11

Aug 11

Oct 11

Nov 11

Last week

Jan 12

Jul 11

Sep 11 Last week

Oct 11 ECB

+45 +40 +35 +30 +25 +20 +15 +10 +5 -

Dec 11

Feb 12

+37 +32 +27

+6

+14

+10 +10

+18

+22

-

Mar 11 May 11 Jun 11 Aug 11 Oct 11 Nov 11 Jan 12 Last week BoE

Mar 12

+80 +70 +60 +50 +40 +30 +20 +10 Feb 11

Mar 12

+60 +40 +20 -

+9

Jun 11

Sep 11

Dec 11

Last week

Apr 12

SNB

JPY 0.10

+50

+43

+40

+5

+30

+1

+1

Jun 11

Jul 11

+3

-

-4

-4

-4

-4

-4 -2 -2

-4

-5

+14

+20

+25 +15

+28

+8

-15

Apr 11

May 11

RBA

NZD 2.50

-

Apr 11

CHF 0.25

+35

-

-5

GBP 0.50

+100

-

-0

FOMC

CAD 1.00

+46

+19

+25 +15

Apr 11

+61

+32

+35

-10

Sep 11 Nov 11 Dec 11 Feb 12 Last week RBNZD

Apr 12

SEK 1.75

-25 Feb 11

May 11

Aug 11 Last week

Nov 11

BoJ

NOK 2.00 +100

+150 +130 +110 +90 +70 +50 +30 +10 -10

+55 +45

-

+10

+55

+65

+46

+60

+71

+81

+25

+84

+60 +60

+40

Jul 11

Sep 11 Nov 11 Dec 11 Feb 12 Apr 12 Last week RIX

Jan 11

+70

+49 +38

+20

-

Apr 11 Jun 11

+80

+24 +8 Apr 11-

+24

Jul 11 Last week

Oct 11

Feb 12 NB

6

Forecast and Forward Monitor In the graphs below we display our forecasts together with consensus and forward price. To visualize volatility and skew we plot the 5 delta and 25 delta strikes. These can be seen as the boundaries for the future spot price implied by options with 90% respectively 50% probabilities. EURSEK EURNOK 12.0

3M 6M 9M 12M 12.0

10.5

3M 6M 9M 12M 10.5

11.5

11.5

10.0

10.0

11.0

11.0

9.5

9.5

10.5

10.5

10.0

10.0

9.0

9.0

8.5

8.5

8.0

8.0 7.5 7.0

9.5

9.5

9.0

9.0

8.5

8.5

7.5

8.0

8.0

7.0

7.5 Dec 08

7.5

6.5 Dec 08

Jun 09

Dec 09

5 Delta (90%) EURSEK

Jun 10

Dec 10

Jun 11

25 Delta (50%) C onsensus

Dec 11 Fwd Nordea

6.5 Jun 09

Dec 09

5 Delta (90%) EURNOK

Fcast

Cons

Fwd

25 delta

5 delta

3M

8.7500

8.7945

9.0512

9.3182 / 8.8353

9.8165 / 8.5023

Jun 10

Dec 10

Jun 11

25 Delta (50%) C onsensus

Dec 11 Fwd Nordea

Fcast

Cons

Fwd

25 delta

5 delta

3M

7.9000

7.6655

7.9615

8.1878 / 7.7735

8.6166 / 7.4961

6M

8.7500

8.6074

9.0747

9.4645 / 8.7743

10.241 / 8.3121

6M

7.7000

7.5335

7.9842

8.3203 / 7.7217

9.0066 / 7.3285

12M

9.0000

8.4728

9.1274

9.7057 / 8.7118

10.934 / 8.0471

12M

7.9000

7.4177

8.0303

8.5402 / 7.6622

9.6509 / 7.0935

24M

9.0000

8.2278

9.2286

24M

8.0000

7.1957

8.1194

EURUSD

EURGBP

1.8

3M 6M 9M 12M 1.8

1.10

3M 6M 9M 12M 1.10

1.7

1.7

1.05

1.05

1.6

1.6

1.00

1.00

1.5

1.5

0.95

0.95

1.4

1.4

0.90

0.90

1.3

1.3

0.85

0.85

1.2

1.2

0.80

0.80

1.1

1.1

0.75

0.75

1.0

0.70 Dec 08

1.0 Dec 08

Jun 09

Dec 09

5 Delta (90%) EURUSD

Jun 10

Dec 10

Jun 11

25 Delta (50%) C onsensus

Dec 11

Fwd Nordea

0.70 Jun 09

Dec 09

5 Delta (90%) EURGBP

Fcast

Cons

Fwd

25 delta

5 delta

3M

1.4500

1.4597

1.4536

1.5001 / 1.4064

1.5706 / 1.3206

Jun 10

Dec 10

Jun 11

25 Delta (50%) C onsensus

Dec 11 Fwd Nordea

Fcast

Cons

Fwd

25 delta

5 delta

3M

0.8700

0.8926

0.8878

0.9172 / 0.8621

0.9675 / 0.8212

6M

1.3500

1.4391

1.4491

1.5204 / 1.3793

1.6315 / 1.2481

6M

0.8800

0.8886

0.8863

0.9311 / 0.8492

1.0103 / 0.7893

12M

1.3000

1.4230

1.4391

1.5517 / 1.3379

1.7382 / 1.1434

12M

0.8400

0.8880

0.8832

0.9527 / 0.8301

1.0829 / 0.7425

24M

1.2500

1.3939

1.4225

24M

0.8300

0.8613

0.8781

EURCHF

USDJPY

1.6

3M 6M 9M 12M 1.6

1.5

1.5

3M 6M 9M 12M

110 105 100

110 105 100

1.4

1.4

95 90

1.3

1.3

1.2

1.2

85 80

85 80

1.1

1.1

75 70

75 70

1.0 Dec 08

1.0

65 60 Dec 08

65 60

Jun 09

Dec 09

5 Delta (90%) EURC HF

Jun 10

Dec 10

Jun 11

25 Delta (50%) C onsensus

Dec 11

Fcast

Cons

Fwd

25 delta

5 delta

3M

1.3000

1.2679

1.2630

1.3061 / 1.2179

1.3649 / 1.1349

Jun 09

Dec 09

5 Delta (90%) USDJPY

Fwd Nordea

Jun 10

Dec 10

Jun 11

25 Delta (50%) Nordea

95 90

Dec 11 Fwd C onsensus

Fcast

Cons

Fwd

25 delta

5 delta

3M

84.0000

82.3505

80.5136

83.787 / 77.381

89.202 / 71.691

6M

1.3000

1.2583

1.2585

1.3198 / 1.1943

1.4001 / 1.0723

6M

86.0000

83.1361

80.4570

85.575 / 75.849

94.347 / 67.344

12M

1.3500

1.2568

1.2492

1.3352 / 1.1603

1.4361 / 0.9815

12M

92.0000

85.4402

80.2440

88.309 / 73.557

102.31 / 61.019

24M

1.3700

1.2534

1.2310

24M

98.0000

86.4134

79.1820

7

Forecast and Forward Monitor AUDUSD

USDCAD

1.3

3M 6M 9M 12M 1.3

1.3

3M 6M 9M 12M 1.3

1.2

1.2

1.1

1.1

1.2

1.2

1.0

1.0

1.1

1.1

0.9

0.9

1.0

1.0

0.8

0.8

0.7

0.7

0.9

0.9

0.6 Dec 08

0.6 Jun 09

Dec 09

5 Delta (90%) AUDUSD

Jun 10

Dec 10

Jun 11

25 Delta (50%) Nordea

Dec 11

0.8 Dec 08

0.8 Jun 09

Dec 09

5 Delta (90%) USDC AD

Fwd C onsensus

Fcast

Cons

Fwd

25 delta

5 delta

3M

1.0000

1.0675

1.0572

1.0911 / 1.0237

1.1425 / 0.9611

Jun 10

Dec 10

Jun 11

25 Delta (50%) Nordea

Dec 11 Fwd C onsensus

Fcast

Cons

Fwd

25 delta

5 delta

3M

0.9700

0.9621

0.9660

1.0027 / 0.9315

1.0602 / 0.8732

6M

0.9500

1.0484

1.0443

1.0955 / 0.9961

1.1759 / 0.9010

6M

1.0200

0.9742

0.9686

1.0252 / 0.9180

1.1176 / 0.8312

12M

0.9000

1.0304

1.0191

1.0963 / 0.9512

1.2289 / 0.8124

12M

1.0300

0.9846

0.9749

1.0630 / 0.9034

1.2149 / 0.7774

24M

0.9000

1.0097

0.9751

24M

1.0300

1.0023

0.9858

NZDUSD

GBPUSD

1.0

3M 6M 9M 12M 1.0

2.2

0.9

0.9

2.0

2.0

0.8

0.8

1.8

1.8

0.7

0.7

1.6

1.6

0.6

0.6

1.4

1.4

0.5

1.2 Dec 08

0.5 Dec 08

Jun 09

Dec 09

5 Delta (90%) NZDUSD

Jun 10

Dec 10

Jun 11

25 Delta (50%) Nordea

Dec 11 Fwd C onsensus

Fcast

Cons

Fwd

25 delta

5 delta

3M

0.7600

0.7785

0.7830

0.8079 / 0.7577

0.8459 / 0.7114

3M 6M 9M 12M

2.2

1.2 Jun 09

Dec 09

5 Delta (90%) GBPUSD

Jun 10

Dec 10

Jun 11

25 Delta (50%) C onsensus

Dec 11 Fwd Nordea

Fcast

Cons

Fwd

25 delta

5 delta

3M

1.6667

1.6354

1.6375

1.6898 / 1.5841

1.7693 / 1.4876

6M

0.7300

0.7707

0.7781

0.8162 / 0.7411

0.8759 / 0.6705

6M

1.5341

1.6196

1.6351

1.7157 / 1.5558

1.8410 / 1.4080

12M

0.7200

0.7568

0.7679

0.8271 / 0.7150

0.9269 / 0.6108

12M

1.5476

1.6025

1.6294

1.7579 / 1.5137

1.9689 / 1.2940

24M

0.7200

0.7390

0.7364

24M

1.5060

1.6184

1.6201

8

Fair Value Retreat towards equilibrium Figure 1. Misalignment against USD. The dotted lines show +/- 1 z-score levels where currencies are considered significantly over- or undervalued. Change from previous week on top of bars.

2.0 1.4 Average Z - score

Expensive currencies +0.01

-0.30

-0.27

-0.58

-0.49

+0.45

-0.22

0.8

-0.30

+0.09

0.2

-0.4

C heap currencies NZD

GBP

SEK

JPY

CAD

NOK

AUD

EUR

-1.0 CHF

During the week commodities fell and brought resource sensitive currencies with them. Notably AUD, NOK and CAD were affected and are no longer standing out as particularly expensive compared to other currencies. Over the board there was a retreat towards fair value levels with the exception of yen. Roughly speaking, all G10 currencies are 3-6 percent overvalued against the USD according to the models.

Fair value heat map Misalignment against USD. The heat map shows the deviation of spot vs fair values (yearly z-scores in brackets). Coloring according to z-scores. Model Macro PPP - CPI PPP - Real rate PPP - PPP Vol - VIX Vol - ATM (1M) Vol - RR (10 delta) Consensus (12m)* CDS - CDS (5y) CDS - Risk free rate Average

Fair Value

EUR -0.02% (-0.01) 6.89% (1.42) 5.25% (1.22) 9.39% (2.13) 6.85% (1.28) 8.12% (1.59) 8.57% (2.08) 10.04% (1.36) 6.22% (1.45) 1.27% (0.60)

GBP 0.67% (0.17) 2.43% (0.51) 4.46% (1.10) 2.15% (0.45) 2.86% (0.64) 2.14% (0.66) 3.71% (1.73) 2.15% (0.31) 1.97% (0.88) -0.01% (-0.01)

AUD 3.89% (1.14) 3.18% (0.74) 8.88% (1.87) 0.04% (0.01) 6.59% (1.83) 9.93% (2.50) 7.51% (2.03) -5.41% (1.12) 2.13% (0.53)

JPY 2.58% (0.59) 2.48% (0.32) 4.08% (0.79) 4.59% (0.81) 3.49% (0.89) 5.32% (1.62) 4.92% (1.40) 9.18% (1.45) 3.01% (0.77) 2.69% (1.23)

CHF -1.16% (-0.24) 6.84% (0.88) 12.09% (2.11) 10.48% (1.81) 8.97% (1.69) 12.47% (2.19) 9.81% (1.89) 5.13% (1.37) 4.9% (1.29) 3.82% (1.45)

CAD 5.82% (1.37) 4.40% (1.05) 3.61% (0.97) 4.28% (1.05) 2.89% (1.23) 2.00% (1.31) 3.89% ( 1.54) 4.38% (0.68) 1.33% (0.69) 0.16% (0.09)

NZD 4.46% (0.34) 5.47% (0.69) 4.36% (0.58) 3.45% (0.44) 3.31% (0.79) 2.76% (0.89) 3.15% (0.93) -2.84% (0.43) 2.27% (0.54)

SEK 7.42% (0.79) 10.44% (1.50) 8.71% (1.45) -0.13% (-0.02) 6.50% (1.30) 8.99% (1.43) 8.11% (1.56) -0.69% (-0.12) -0.99% (-0.16) 4.93% (2.03)

NOK 7.62% (1.42) 5.18% (0.76) 7.13% (1.82) 5.59% (0.93) 5.91% (1.45) 8.11% (1.94) 6.33% (1.60) -1.70% (-0.35) 0.83% (0.22) 4.86% (2.00)

6.26% (1.31)

2.25% (0.65)

5.28% (1.31)

4.24% (0.99)

7.33% (1.45)

3.28% (1.00)

3.56% (0.63)

5.33% (0.98)

4.99% (1.18)

EURUSD 1.38

GBPUSD 1.61

AUDUSD 1.01

USDJPY 83.37

USDCHF 0.93

USDCAD 1.00

NZDUSD 0.76

USDSEK 6.51

USDNOK 5.71

* Consensus Economic Inc.

Very Rich Rich Neutral Cheap Very Cheap

Z-score > 2 1 < Z-score < 2 -1 < Z-score < 1 -2 < Z-score < -1 Z-score < -2

Z - score = (current FX spot - current fair value) / stdev, i.e. how many standard deviations the spot is from the fair value.

The models Using a set of regression models the long term fair values of G10 currencies are estimated. The models are split into five different categories. Macro: Uses macroeconomic indicators such as industry production and money supply to calculate fair values. Purchasing Power Parity: Is based on the relative price levels and interest rates of the two countries.

Consensus: Three month forecasts are used as input variables to generate fair values. CDS: To capture the overall riskiness of a country CDS spreads are used both as standalone variables and in a real rate framework.

Vol: Estimates fair values by means of volatility proxies such as implied vol, risk reversal and VIX.

9

Volatility Current 1M ATM vs. 3 month mean Figure 1. Divergence of 1M implied vol from 3 month mean. Z-Score = (current – mean)/stdev

FX vols have in general edged up significantly. High value is found in USDSEK and USDNOK vol.

4.0

Volatility Rich

3.0

-2.0

NOKSEK

GBPUSD

NZDUSD

EURCHF

USDJPY

USDCAD

EURNOK

CHFNOK

EURSEK

CHFSEK

EURGBP

GBPNOK

EURJPY

JPYNOK

JPYSEK

EURUSD

GBPSEK

-1.0

AUDUSD

0.0

USDNOK

1.0

USDSEK

Z-Score

2.0

Volatility Cheap

Current 1M ATM vs. realized volatility Figure 2. Residual from regressing 1M implied vol against realized vol. Z-Score = (current – regression value)/stdev. Realized vol calculated using an exponentially weighted moving average. For the regression we use one year of data.

GBPNOK

GBPUSD

EURGBP

JPYNOK

JPYSEK

EURJPY

NZDUSD

EURNOK

EURUSD

USDJPY

GBPSEK

CHFNOK

USDNOK

EURSEK

USDCAD

USDSEK

CHFSEK

EURCHF

Z-Score

0.0

Volatility Rich

NOKSEK

1.0

AUDUSD

Implied vol has picked up also in relation with realized and Scandies look particularly expensive.

-1.0

-2.0

Volatility Cheap

ATM volatility heat map Notice how USDSEK, USDNOK and EURUSD vol appears expensive in comparison with the mean for practically all time horizons considered. 1W

EURUSD EURJPY EURGBP EURCHF EURSEK EURNOK USDSEK JPYSEK GBPSEK CHFSEK NOKSEK USDNOK JPYNOK GBPNOK CHFNOK AUDUSD USDCAD NZDUSD GBPUSD USDJPY Very Rich Rich Neutral Cheap

Rich/ Cheap

2.6 3.5 1.1 0.4 0.6 1.4 3.1 3.9 1.1 1.3 1.0 3.7 3.5 1.1 1.0 3.2 0.7 0.6 1.0 2.3

2W

Vol

ZScore

Rich/ Cheap

Vol

12.8 15.8 9.3 10.0 8.2 8.7 14.8 16.3 10.3 11.5 8.2 15.1 16.2 10.5 11.3 14.2 9.0 11.8 9.8 12.8

3.5 1.5 2.8 0.6 0.9 2.8 3.6 1.8 3.0 1.5 1.5 3.5 1.6 2.2 1.3 2.5 1.0 0.5 1.6 1.0

2.2 3.0 1.1 0.3 0.2 0.4 2.7 3.5 1.3 1.2 0.2 3.3 3.0 1.1 0.9 2.6 0.5 0.9 0.5 1.6

12.4 15.2 9.3 10.0 7.8 7.8 14.4 15.7 10.5 11.5 7.5 14.8 15.6 10.5 11.3 13.5 8.7 12.2 9.3 12.0

Z-Score > 2

1M Z- Score

Rich/ Cheap

3.3 1.5 2.8 0.5 0.7 1.0 3.7 1.8 3.2 1.6 0.4 3.6 1.7 2.8 1.3 2.5 0.8 0.9 0.8 0.9

1.2 2.4 0.4 0.1 0.3 0.2 1.8 2.8 0.6 1.0 0.1 2.1 2.4 0.5 0.7 1.9 0.4 0.2 0.1 0.9

3M

Vol

ZScore

Rich/ Cheap

11.6 14.6 8.7 9.9 7.8 7.6 13.6 15.2 10.0 11.7 7.0 13.7 15.0 10.0 11.2 13.0 8.7 11.5 8.9 11.3

2.0 1.4 1.4 0.2 1.2 1.0 3.2 1.8 2.2 1.3 0.2 3.2 1.6 1.4 1.0 2.3 0.8 0.2 0.2 0.7

1.3 2.0 0.2 0.3 0.1 0.0 1.8 2.6 0.4 1.0 0.0 2.0 2.3 0.2 0.8 1.2 0.3 0.3 0.0 0.9

6M

Vol

ZScore

Rich/ Cheap

12.5 15.0 9.1 10.3 7.7 7.5 14.4 16.0 10.3 12.1 6.9 14.5 15.8 10.2 11.5 13.4 9.1 12.8 9.5 11.9

3.1 1.5 0.9 0.6 0.8 -0.2 3.5 2.0 1.7 1.4 -0.1 3.4 1.7 0.7 1.6 2.0 0.9 0.5 0.0 0.8

1.1 1.3 0.0 0.3 0.0 -0.1 1.5 1.8 0.2 0.8 -0.1 1.7 1.5 0.0 0.7 1.0 0.3 0.1 -0.1 0.6

1Y

Vol

ZScore

Rich/ Cheap

Vol

ZScore

13.0 15.3 9.5 10.5 7.7 7.6 14.9 16.3 10.8 12.0 6.9 15.0 16.2 10.6 11.7 14.1 9.6 13.5 10.1 12.6

3.1 1.3 0.0 0.7 0.2 -0.5 3.2 2.0 1.1 1.1 -0.5 3.1 1.6 -0.1 1.4 2.2 1.0 0.3 -0.4 0.6

0.9 0.7 0.1 0.4 0.0 -0.1 1.3 1.1 0.3 0.9 0.0 1.5 1.0 0.0 0.7 0.5 0.2 0.2 -0.1 0.3

13.5 15.8 10.1 10.7 7.8 7.8 15.3 17.0 11.3 12.2 7.0 15.4 16.8 11.1 11.9 14.3 10.0 14.3 10.9 13.5

3.2 1.0 0.3 0.8 0.1 -0.5 2.8 1.6 1.5 1.1 -0.5 2.7 1.4 0.1 1.2 1.4 0.7 0.5 -0.4 0.4

Vol is current ATM volatiltiy, data as of 03 May 2011

1 < Z-Score < 2

Rich/Cheap = current ATM volatility - 3 month average ATM volatiltiy

-1 < Z-Score < 1 -2 < Z-Score < -1

Z-Score = (current ATM volatility - 3 month average ATM volatiltiy)/stdev, i.e. how many standard deviation current ATM vol is from mean.

Very Cheap Z-Score < -2

10

Correlation Tracker Notice how AUDUSD correlation has tended to one and even more so during the last week as the aussie fell against the dollar. This correlation is likely to stay and in case commodity and equity markets would fall it’s time to cover up open positions. EURSEK

EURNOK 0.4

0.5 0.0

0.1 -0.4

-0.3 -0.7 10-Feb

25-Feb

SP500

12-Mar 27-Mar VIX

11-Apr

Brent

26-Apr

-0.8 10-Feb

EURSEKRateDiff

Highest Short-Term Correlations to EURSEK

25-Feb

SP500

12-Mar 27-Mar Brent

11-Apr

Gold

26-Apr

EURNOKBasis

Highest Short-Term Correlations to EURNOK

Brent

SP500

EURSEKRateDiff

VIX

Brent

SP500

Gold

EURNOKBasis

-64%

-41%

38%

38%

-67%

-53%

-49%

47%

Highest Long-Term Correlations to EURSEK SP500

VIX

EURSEKRateDiff

Brent

-38%

37%

29%

-28%

EURUSD

Highest Long-Term Correlations to EURNOK SP500

Brent

EURNOK2/10

VIX

-39%

-37%

-35%

33%

EURGBP

1.0 0.6

0.6

0.2

0.2

-0.2

-0.2 -0.6 10-Feb 25-Feb 12-Mar 27-Mar 11-Apr 26-Apr SP500 EURUSD2/10 EURUSDRateDiff C opper Highest Short-Term Correlations to EURUSD

-0.6 10-Feb 25-Feb 12-Mar 27-Mar 11-Apr 26-Apr EURUSD Gold EURGBPBasis EURGBPRateDiff Highest Short-Term Correlations to EURGBP

EURUSD

SP500

EURUSD2/10

EURUSDRateDiff

EURGBPRateDiff

EURUSD

Gold

EURGBPBasis

100%

61%

-52%

46%

67%

57%

-35%

-32%

Highest Long-Term Correlations to EURUSD EURUSD

SP500

EURUSDRateDiff

VIX

100%

48%

45%

-38%

EURCHF

Highest Long-Term Correlations to EURGBP EURUSD

EURGBPRateDiff

EURGBPBasis

SP500

64%

37%

-23%

19%

USDJPY

0.7

0.4

0.3

0.0

-0.1 -0.4

-0.5 -0.9 10-Feb

25-Feb

EURUSD

12-Mar 27-Mar SP500

11-Apr

VIX

26-Apr

EURC HFBasis

Highest Short-Term Correlations to EURCHF

-0.8 10-Feb

25-Feb

EURUSD

12-Mar 27-Mar SP500

11-Apr VIX

26-Apr Brent

Highest Short-Term Correlations to USDJPY

EURUSD

EURCHFBasis

VIX

SP500

Brent

SP500

VIX

EURUSD

50%

-47%

-47%

36%

31%

24%

-22%

17%

Highest Long-Term Correlations to EURCHF EURUSD

SP500

EURCHFRateDiff

VIX

52%

41%

39%

-36%

Highest Long-Term Correlations to USDJPY VIX

SP500

Gold

USDJPY2/10

-40%

36%

-17%

16%

11

Correlation Tracker AUDUSD

NZDUSD

0.9

0.7 0.3

0.5

-0.1

0.1

-0.5

-0.3 10-Feb

25-Feb

EURUSD

12-Mar 27-Mar SP500

11-Apr Brent

26-Apr Gold

Highest Short-Term Correlations to AUDUSD

-0.9 10-Feb

25-Feb

SP500

12-Mar 27-Mar VIX

11-Apr

Brent

26-Apr Gold

Highest Short-Term Correlations to NZDUSD

SP500

Brent

Gold

EURUSD

SP500

Gold

Brent

VIX

83%

71%

65%

60%

67%

58%

56%

-53%

Highest Long-Term Correlations to AUDUSD SP500

VIX

EURUSD

AUDUSDRateDiff

78%

-72%

60%

44%

USDCAD 0.7 0.3 -0.1 -0.5 -0.9 10-Feb

25-Feb

SP500

12-Mar 27-Mar VIX

11-Apr

Brent

26-Apr Gold

Highest Short-Term Correlations to USDCAD Gold

SP500

VIX

Brent

-69%

-67%

56%

-41%

Highest Long-Term Correlations to USDCAD SP500

VIX

USDCADRateDiff

EURUSD

-79%

70%

56%

-48%

Highest Long-Term Correlations to NZDUSD SP500

EURUSD

VIX

NZDUSDRateDiff

70%

61%

-61%

33%

Fact Box We display the movements in realized correlation between the major currency crosses and important drivers. For each currency cross short-term correlation movements are displayed in the graphs. In the tables we display the highest short-term and long-term (1Y) correlated assets. Short-term correlations are calculated using an exponentially weighted moving average (EWMA), a method designed to quickly pick up changes. The drivers considered for each currency cross are EURUSD spot, S&P 500, Chicago Board Options Exchange Volatility Index (VIX), gold, copper, CRB Metals Index, Brent crude oil, slope in cross asset rate curve (2Y/10Y swap rates), difference in basis spreads (OIS v.s. Libor 3M), and difference in short rates (4th FRA contract)

12

Seasonality May – CAD outperforming Over the last years the Canadian dollar has performed well in May and appreciated in 9 of the last 10 years. No other strong signs of seasonality seen. 100%

Percentage of last 10 years when currency 60% cross has appreciated in May 20%

60%

50%

50%

USDJPY

AUDUSD

EURSEK

EURGBP

EURNOK USDCAD

20%

Percentage of last 10 years when currency 60% cross has depreciated in May

EURCHF

NZDUSD

EURUSD

60%

60%

60%

100%

70%

70%

90%

June – No strong signs of seasonality No strong sings of seasonality detected for June, if anything safe havens JPY and CHF have in 7 out of the last 10 years depreciated against the dollar and the euro whereas CAD has appreciated in 7 out of the last 10 years versus the dollar. 100%

Percentage of last 10 years when currency 60% cross has appreciated in June 20%

70%

70%

60%

60%

NZDUSD

EURGBP

EURNOK

EURUSD USDCAD

20%

Percentage of last 10 years when currency 60% cross has depreciated in June

USDJPY

EURCHF

AUDUSD

EURSEK

50%

50%

50%

50% 70%

100%

July – Strong NOK EURNOK stands out since the cross has fallen in July in 8 out of the last 10 years; if anything else USDJPY have appreciated in July in 7 of the last 10 years. 100%

Percentage of last 10 years when currency 60% cross has appreciated in July 20%

70%

60% NZDUSD

AUDUSD

EURGBP

EURCHF

EURSEK

EURUSD EURNOK

20%

Percentage of last 10 years when currency 60% cross has depreciated in July

100%

USDJPY

USDCAD 60%

60%

60%

60%

60%

60% 80%

13

Technical Analysis Boris Simonder, CMT, +46 8 614 7258 Michael Canborn, +46 8 614 6509 EUR/USD – eight hour view

AUD/USD – eight hour view

Recent price action saw EURUSD consolidate within 1.4890-1.4755 range. The cross never managed to close above 1.4882 on daily basis, which was our requirement for going bullish again. But given yesterday's ECB announcement of holding rates unchanged, and the absence of the wording "strong vigilance", the market decided to punish EUR. The sharp sell off comes also against a general "risk-off" environment with commodities being thrown out the window. The question we ask, is this correction the beginning of a new downtrend, or will it just be a temporary sell off? Well, given today's important U.S non-farm payroll it's not all clear whether FX markets are going for a stronger Dollar. It's a bit early for us, hence, we remain neutral.

Upside resistance: 1.4650/30, 1.4755 Downside support: 1.4494, 1.4445

Whoever said that financial markets are driven by emotions certainly has a point! The sharp pullback in commodities, initiated by the brutal sell off in silver, has been the primary driver for commodity currencies such as AUD. As illustrated by the chart we can see the sharp turn in CRB commodity index leading the way for Australian dollar. This occurs during a time when the swap rate spread is rising in favor for AUD. As previously mentioned, we would go from bullish to neutral on close below 1.0680, which happened yesterday (1.0570). For now we're taking a step back to see if a new downtrend is about to develop, for this to happen we want to see a change from "buy-the-dips" to "sell-the-rallies". A close below 1.0540 would make us go bearish on short term. For now we are neutral. Upside resistance: 1.0680, 1.0775 Downside support: 1.0577, 1.0540

EUR/SEK – daily view

USD/JPY – ten hour view

EURSEK has since last week appreciated and for the second time in a month approached its 200-day Moving Average. In addition, the cross has accumulated two higher bottoms from 8.70 on monthly basis, signaling a change in the trend structure. We stick to our neutral trend rating, but we would change the short term trend rating to bullish if the cross closes above 200-day Moving Average, currently at 9.0950, on daily basis. Upside resistance: 9.1250, 9.16/17 Downside support: 8.99, 8.89/90

The USDJPY cross continues to slide to new short term lows (79.57) against general Dollar weakness and falling rate spreads as shown in the chart. During this apparent downtrend we've held a neutral view since 84.40, and have continued to hold this view due to our complacency on the direction. For now we continue to stay on the sidelines (neutral). Upside resistance: 80.63/75, 81.27 Downside support: 79.58, 78.84

14

Technical Analysis Boris Simonder, CMT, +46 8 614 7258 Michael Canborn, +46 8 614 6509 EUR/GBP – daily view

EUR/CHF – daily view

Last week we highlighted a bullish case upon close above 0.8923. This happened with a bang on May 3rd as GBPUSD took a heavy blow against a poor U.K PMI report. Consequently EURGBP cross continued to rally towards the resistance zone of 0.9044 before making a sharp reversal on yesterday's ECB event. While we were correct on the short term direction prior to ECB, the outlook has gotten murkier. Nonetheless, we will maintain a bullish bias for now given that the cross does not close below the rising support line, currently at 0.8848. Upside resistance: 0.8923, 0.8983 Downside support: 0.8818, 0.8715

EUR got smashed yesterday on Jean-Claude Trichet’s dovish statements at the European Central Bank’s press conference after the decision to hold rates unchanged. EURCHF closed below our threshold level to go bearish at 1.27 and we’re now watching 1.2570 as the forthcoming level on the downside, followed by 1.24. We maintain our bearish trend rating and only a daily close above the new trendline resistance (currently at 1.2880) would make us change back to neutral. Upside resistance: 1.27, 1.2740 Downside support: 1.2570, 1.24

EUR/NOK – weekly view

USD/CAD – daily view

EURNOK has since last week appreciated sharply, mainly due to falling commodity prices. The cross has broken above both 40-week Moving Average (i.e. 200-day Moving Average) and the long term trendline resistance from Q3 2009. EURNOK is currently testing the top of the trading range which has been in place since beginning of this year; thus, closing break above 7.97 would make us change the trend rating to bullish. But for now, we stay neutral.

USDCAD has since last week closed above our threshold level to go neutral at 0.9570 and the cross is now trying to break above the falling trendline resistance. CAD depreciation comes against heavily falling commodity prices and decreasing risk appetite. Looking ahead, we would change the short term trend to bullish if the cross closes above the prior peak at 0.9720 on daily basis. On the downside, the cross needs to close below 0.9457 before we turn back to bearish rating.

Upside resistance: 7.97, 8 Downside support: 7.86, 7.8288

Upside resistance: 0.9668, 0.9720 Downside support: 0.9570, 0.9527

15

G10 Calendar Monday 09-May-11 10:00 NO Credit growth, domestic, C2 (y/y) Mar 14:15 CA House starts Apr Tuesday 10-May-11 01:01 GB House price balance, RICS Apr 06:00 CN Trade balance (USD) Apr 08:45 FR Industrial production (m/m) Mar 08:45 FR Industrial production (y/y) Mar 09:15 CH CPI (m/m) Apr 09:15 CH CPI (y/y) Apr 09:30 SE Industrial orders (y/y) Mar 09:30 SE Industrial production (m/m) Mar 09:30 SE Industrial production (y/y) Mar 10:00 NO CPI (y/y) Apr 10:00 NO CPI, core (y/y) Apr 13:30 US NFIB small business optimism index Apr 14:00 NO CPIXE and other inflation indicators Apr 14:30 US Import prices (m/m) Apr 14:30 US Import prices (y/y) Apr 15:30 US Fed's Duke speaks on community development in St. Louis 18:45 US Fed's Lacker speaks on economic outlook in Arlington, VA Wednesday 11-May-11 CN Money supply, M2 (y/y) Apr 04:00 CN CPI (y/y) Apr 04:00 CN Industrial production (y/y) Apr 04:00 CN Retail sales (y/y) Apr 08:00 DE CPI (m/m, final) Apr 08:00 DE CPI (y/y, final) Apr 08:00 SE Prospera inflation expectations, money market 10:15 EU ECB's Coene speaks at Brussels finance conference 11:00 SE SNDO to auction T-bills (SEK 10 bn) 11:30 GB BoE publish inflation report 12:30 EU ECB's Stark speaking in London 13:00 US Mortgage applications, MBA 14:30 CA Trade balance Mar 14:30 US Trade balance Mar 17:15 EU ECB's Orphanides speaks at Brussels finance conference 18:15 US Fed's Lockhart speaks on U.S. economic outlook in Atlanta 19:00 US Fed's Kocherlakota speaks on monetary policy in New York Thursday 12-May-11 07:30 FR CPI (m/m) Apr 07:30 FR CPI (y/y) Apr 09:30 SE CPI (m/m) Apr 09:30 SE CPI (y/y) Apr 09:30 SE CPIF (m/m) Apr 09:30 SE CPIF (y/y) Apr 10:00 EU ECB Publishes May Monthly Report 10:00 NO Credit growth, total, C3 (y/y) Feb 10:30 GB Industrial production (m/m) Mar 10:30 GB Industrial production (y/y) Mar 10:30 GB Manufacturing production (m/m) Mar 10:30 GB Manufacturing production (y/y) Mar 11:00 EU Industrial production (sa, m/m) Mar 11:00 EU Industrial production (wda, y/y) Mar 11:00 SE SNDO to auction inflation-linked bonds (SEK 0.75 bn) 14:00 NO Norges Bank holds press conference after rate decision 14:00 NO Norges Bank publishes interest rate decision 14:30 CA New housing price index (m/m) Mar 14:30 US Fed's Plosser speaks on economic outlook in Aventura, Florida 14:30 US Jobless claims, continuing 14:30 US Jobless claims, initial 14:30 US PPI (m/m) Apr 14:30 US PPI (y/y) Apr 14:30 US PPI, core (m/m) Apr 14:30 US PPI, core (y/y) Apr 14:30 US Retail sales (m/m) Apr 14:30 US Retail sales, ex auto and gas (m/m) Apr 14:30 US Retail sales, less autos (m/m) Apr 16:00 US Bernanke, Bair testify at senate hearing on systemic risk 16:00 US Business inventories (annual revision) 16:00 US Business inventories (m/m) Mar Friday 13-May-11 07:30 FR GDP (q/q, preliminary) Q1 07:30 FR GDP (y/y, preliminary) Q1 08:00 DE GDP (sa, q/q, preliminary) Q1 08:00 DE GDP (wda, y/y, preliminary) Q1 08:00 DE GDP (y/y, preliminary) Q1 09:30 SE Capacity utilization, manufacturing industry Q1 09:30 SE Inventories, manufacturing industry Q1 09:50 EU ECB's Ordonez speak in Madrid 10:00 IT GDP (q/q, priliminary) Q1 10:00 IT GDP (y/y, priliminary) Q1 10:00 NO Result Government Pension Fund - Global (Q1) 10:00 SE The Sw. financial supervisory publishes a report on stability measures 10:00 SE Unemployment, Swedish Public Employment Service Apr 11:00 EU GDP (sa, q/q, preliminary) Q1 11:00 EU GDP (sa, y/y, preliminary) Q1 11:45 NO Ministry of Finance publishes the Revised National Budget 2011 12:00 NO Norges Bank announces auction of Treasury bonds 14:30 US CPI (m/m) Apr 14:30 US CPI (y/y) Apr 14:30 US CPI, core (m/m) Apr 14:30 US CPI, core (y/y) Apr 15:55 US Consumer confidence, University of Michigan (preliminary) May 16:00 US Durable goods orders (annual revision)

Nordea Consensus 6.4%

Actual

Nordea

Actual

Consensus -22% 4.20bn 0.4% 0.4% 0.6%

1.2 1.2 1.6 1.8% 10.3%

Nordea 5.3%

Consensus 16.6% 5.2% 14.6% 17.5%

Actual

0.2% 2.4%

Consensus 0.4% 2.2%

Previous 16.6% 5.4% 14.8% 17.4% 0.2% 2.4%

-4.0% 0.03bn -45.8bn

-47.0bn

Nordea

Previous 5.9% 188.8k Previous -23% 0.14bn 0.4% 5.6% 0.6% 1.0% 13.7% 1.1% 16.9% 1.0% 0.8% 91.9 1.2% 2.7% 9.7%

Actual

0.4% 3.3% 0.4% 1.8%

Previous 0.8% 2.0% 0.7% 2.9% 0.4% 1.5% 6.7% -1.2% 2.4% 0.0% 4.9% 0.4% 7.3%

0.8% 1.1% 0.4% 2.8% 0.5%

2.00% 0.4%

0.5% 0.2% 0.6%

Nordea

3733k 474k 0.7% 5.8% 0.3% 1.9% 0.4% 0.6% 0.8%

0.6% 6.5% 0.2% 2.1% 0.6% 0.5% 0.6%

0.9% Consensus 0.6% 1.8%

0.9% 4.2%

Actual

0.5% Previous 0.4% 1.5% 0.4% 4.0% 4.0%

0.1% 1.5%

0.6% 2.3%

0.6% 2.3%

4.3% 0.3% 2.0%

0.4% 3.1% 0.2% 1.3% 69.0

0.4% 3.1% 0.2% 1.3% 70.0

0.5% 2.7% 0.1% 1.2% 69.8

16

Global Alpha Strategy Jonas Thulin +46 8 614 9297 [email protected]

Fredrik Floric +46 8 614 8215 [email protected]

Daniel Nilsmo +46 8 614 8232 [email protected]

Nils Rosendahl +46 8 614 9936 [email protected]

Alexander Wojt +46 8 614 7308 [email protected]

Boris Simonder, CMT +46 8 614 7258 [email protected]

Michael Canborn +46 8 614 6509 [email protected]

Nordea Markets is the name of the Markets departments of Nordea Bank Norge ASA, Nordea Bank AB (publ), Nordea Bank Finland Plc and Nordea Bank Danmark A/S. The information provided herein is intended for background information only and for the sole use of the intended recipient. The views and other information provided herein are the current views of Nordea Markets as of the date of this document and are subject to change without notice. This notice is not an exhaustive description of the described product or the risks related to it, and it should not be relied on as such, nor is it a substitute for the judgement of the recipient. The information provided herein is not intended to constitute and does not constitute investment advice nor is the information intended as an offer or solicitation for the purchase or sale of any financial instrument. The information contained herein has no regard to the specific investment objectives, the financial situation or particular needs of any particular recipient. Relevant and specific professional advice should always be obtained before making any investment or credit decision. It is important to note that past performance is not indicative of future results. Nordea Markets is not and does not purport to be an adviser as to legal, taxation, accounting or regulatory matters in any jurisdiction. This document may not be reproduced, distributed or published for any purpose without the prior written consent from Nordea Markets.

17

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