8/9/2019 Lloyds TSB JUL 02 FX Strategy Weekly
1/15
FX Strategy Weekly
Friday, 2nd July 2010
Kenneth BrouxSenior Market Economist
0207 158 1750
Market Strategy
Lloyds TSB Corporate Markets Economic Research, 10 Gresham Street, London, EC2V 7AE, Switchboard: 0207 626 1500.
1
Market Outlook
Tactical view:
= USD still on the back foot
The Swiss franc has replaced the USD as preferred store of refuge in the G10 as the USeconomy clouds over and global equity benchmarks sink to the lowest levels for the year.With risk aversion stepped up and US short-term yields sinking to new historic lows, welook for the USD to stay under pressure over the coming week and the dollar index toclose in on key support in the 83.19 area. The aggressive unwinding of short EUR and GBPpositions is likely to slow ahead of the BoE and ECB meetings though no policy changes areanticipated. The ECB weekly refinancing operation is set to attract close scrutiny after theexpiry of the one-year tender and the smooth transition to 3-month funding. We look to theRBA and Canadian jobs data for guidance on AUD and CAD, though feel defensivestrategies are advised as the CRB and S&P eye pivotal support levels.
Recap
A broad-based retreat in global equities and an unrelenting run of weak US macro databoosted demand for the Swiss Franc and the JPY, propelling both currencies to the top ofthe weekly G10 rankings. USD/CHF has now extended its slump to 10 big figures sincemid-June, sliding below 1.06. GBP enjoyed a mixed week, posting gains vs the highyielding and commodity currencies, but losing ground vs the Franc, EUR and SEK. The USemployment report for June the June 17 SNB meeting, and progressed to below 1.35 vsthe EUR. USD/CHF slipped below 1.10.
UK macro data brought news of slowing housing market activity and confirmation of arebound in business investment in Q1 (+7.8% q/q). The latest credit conditions survey fromthe BoE presented a sobering picture for Q3, with credit availability of secured credit to
households set to decline, but to increase slightly to corporates. The manufacturing andconstruction PMI were steady in June, holding at 57.5 and 58.4, respectively vs May. MPCmembers Miles and Posen made no judgement on whether further asset purchases will benecessary and reiterated that credit developments in the euro zone pose a challenge for theUK economy. The US unemployment rate fell to 9.5% in June from 9.7% in May.
UK rates extended their bullish run backed by flight-from-risk and weak US macro data.10y yields hit a 3.30% low, supporting the bullish flattening influence in 2s/10s (255bp). 5yswaps fell to a 2.41% low but ended the week at 2.48%. Trendline resistance runs at2.55%. The 3mth Libor/Ois spread held steady at 24bp in contrast to the widening in EUR(+6bp to 33bp). The ECB switched successfully from a one-year to a 3-month tender,attracting bids of only 132bln eur. The special 6-day fine tuning operation attracted bid of111.2bln eur, leaving the ECB with excess liquidity of 289bln eur. Gilt sales (IL 2047) and thesyndicated 2040 deal attracted very solid demand.
Contents Page
Market Outlook, IMF Cofer reserve comment ................................................................. 2
Quantitative Market Analysis................. ............................................................................. 4
FX & commodity futures positioning ............................................................... 5
FX options: Risk reversal skews ...................................................................... 6
FX options: Implied volatility ............................................................................ 7
Economic data surprises ................................................................................. 8
Interest rate spreads vs. FX............................................................................. 9
S&P500 vs. FX ................................................................................................ 10
Commodities vs. FX ........................................................................................ 11
Market Review ............................................................................................................. ..... 12
Disclaimer ........................................................................................................ ................. 15
Close
Weekly
Change
FX %
GBP/EUR 1.2156 1.60%
GBP/USD 1.4985 1.09%
GBP/JPY 133.86 -0.45%
GBP/CHF 1.6398 -0.21%
GBP/AUD 1.7268 1.57%
GBP/NZD 2.1106 0.62%
GBP/CAD 1.5550 2.64%
GBP/NOK 9.6862 2.70%
GBP/SEK 11.60 1.30%
EUR/USD 1.2328 -0. 48%
USD/JPY 89.33 -1.52%
AUD/USD 0.8678 -0. 48%
NZD/USD 0.7100 0.44%
USD/CAD 1.0377 1.56%
USD/SEK 7.7440 0.21%
USD/NOK 6.4643 1.62%
USD/CHF 1.0943 -1. 28%
Swaps % bp
2yr 1.439 -7.9
5yr 2.472 -14.3
10yr 3.418 -13.3
Equities %
FTSE100 5046.47 -3.89%
8/9/2019 Lloyds TSB JUL 02 FX Strategy Weekly
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G10 FX - Q1 currency reserves: EUR below 30% in EM, others gain
Market StrategyJuly 2010
Kenneth Broux - Senior Market Economistcontact: +44 207 158 1750
The IMF earlier this week published its latest quarterly update of the composition of official foreign exchange reserves (Cofer
data). Concentrating on the allocated reserves at the World level, the share of the USD fell marginally to 61.55% in Q1-10 from
62.17% in Q4-09. The share of EUR edged lower to 27.2% from 27.3%. Gains were noted for GBP (4.34% vs 4.29%), the JPY (3.14%vs 3.01%) and the Swiss Franc (0.12% vs 0.11%). The biggest increase, however, was recorded for the so-called others . These
include G10 currencies like the NOK, SEK CAD, AUD and NZD, which saw their share climb to 3.65% from 3.12%. In dollar terms,
this is equivalent to a rise of roughly $24bln.
The picture at the World level is representative of the changes in Emerging and developing economies where most of theinternational reserves are currently managed. Though the share of unallocated reserves rose by approx. $50bln to $3.305trln,
changes in the individual composition in emerging markets have a major influence at the global level simply because emerging
markets currently hold 66% of the worlds total currency holdings. Whereas the share of EUR in Emerging economies rose in Q1 to
25.15% from 24.81% (+$13bln), the contribution of the EUR fell back below the 30% threshold to 29.5%. Though swings on this scale
are hardly alarming, they are significant in the context of and back up the bearish price action in EUR crosses over Q1.
How the EU debt crisis plays out, the outcome of the EU bank stress tests, and the shift to a mindset where the USD is no longerconsidered an attractive safe-haven play as the economy slows (see separate note: safe haven flows desert the USD) will be
instructive as to how reserves are managed during the second half of 2010. A fading of risk appetite and growing doubts over
the pace of the US and euro zone economic recoveries y may thwart demand for non-G3 currencies, with GBP potentially set to
increase its appeal in the wake of the fiscal policy objectives set out in the June 22 Budget. A stalling of rate hike expectations in
Sweden, Norway, Canada and Australia may also temper diversification flows into the other currencies, though this should be
offset by unrelenting growth rate in Chinese exports (+48.5% y/y in May).
A further sell-off in EUR crosses in Q2 implies that EUR holdings were probably cut back further in Q2. The weak performance of
the EUR and commodity and high yield currencies in Q2 (AUD, CAD, NOK) as a result of sovereign debt jitters in the euro zone and
the rotation out of risk assets into government bonds implies that the USD probably saw its account in global reserves improve
from the 61.5% rate at the World level and 58% in Emerging markets. The explosion in SNB currency reserves to SwF232bln
between April and May implies that greater swings should transpire in the Q2 data, especially with regard of the EUR. The
substitution of the USD as the safe-haven by the Swiss franc means that the allocation of the latter at the World level to 2008 highs.
Allocated reserves - Developing economies
Allocated reserves - World Allocated reserves - Advanced economies
Rise in unallocated reserves is stabilising
0
10
2 0
3 0
4 0
5 0
6 0
7 0
U SD G B P JP Y C H F E U R O T H ER S
Q 4 -0 9 Q 1- 10%
0
1 0
2 0
3 0
4 0
5 0
6 0
7 0
U SD G B P J P Y C H F E U R O T H E R S
Q 4 - 0 9 Q 1 - 10%
0
10
20
30
40
50
60
7 0
USD GB P JPY C HF EUR O THER S
Q 4-09 Q 1-10%
0
2 0
4 0
6 0
8 0
1 0 0
1995
1998
2001
2004
2007
2010
-q1
A llo ca te d re se rv es U n a llo ca te d re se rv e s
8/9/2019 Lloyds TSB JUL 02 FX Strategy Weekly
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Allocated reserves - World, % Allocated reserves - Advanced economies, %
Q4-09 Q1-10
USD 65.39 64.66
GBP 2.83 2.79
JPY 4.10 4.28
CHF 0.17 0.17
EUR 24.81 25.15
OTHERS 2.69 2.96
Q4-09 Q1-10
USD 58.51 58.04
GBP 5.93 6.10
JPY 1.78 1.86
CHF 0.03 0.05
EUR 30.13 29.51OTHERS 3.61 4.43
Allocated reserves - Emerging economies, %
Q4-09 Q1-10
USD 62.17 61.55
GBP 4.29 4.34
JPY 3.01 3.14
CHF 0.11 0.12
EUR 27.30 27.20
OTHERS 3.12 3.65
8/9/2019 Lloyds TSB JUL 02 FX Strategy Weekly
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Quantitative Market Analysis
GBP/USD correlation slumps with stocks, commodities
EUR/CHF 1y vol hits new high
4
Table 1: 1-month rolling correlations
Contrarian Indicators
Risk Reversal Skews (based on options prices, see page 7)
and IMM data (highlighting speculative positioning, see page
6) are used to analyse foreign exchange to understand how
stretched currencies may have become.
Market participants reduced speculative short GBP positions
to -62,100 contracts over the past week to the lowest level
since April 20. By contrast, short EUR positions were boosted
to -81,200, causing the short EUR/GBP spread to widen to -
19,100 contracts. An unwinding of EUR short contracts is likely
to have taken place over the last trading sessions as EUR/
GBP firmed back over 0.82. Separately, the impressive rally
in GBP/USD through 1.52 points to a further reduction in GBP
short positions to below 60,000 contracts.
The fading in USD safe haven flows has been reflected in a
shift in IMM positions for most currencies, with changes in JPY
positioning standing out. Short JPY positions were reduced to
-4,000 (+12,800 net change) and probably moved into positive
territory as USD/JPY revisits sub 88.0 territory. Momentum
also favours the CHF, backed by a slide in USD/CHF below
1.08 to a 1.0583 low. Short CHF positions remain significant
though at -17,700, but should be subject to a further shortcovering when the next set of IMM data are published. Long
CAD and AUD positions stabilised at 47,600 and 15,600
contracts respectively, showing no major variation vs the USD.
The RBA rate decision and Canadian employment stats are
due next week and may cause momentum to shift, though
we suspect that equity markets and commodity prices remain
pivotal to near-term direction as central banks in both regions
may choose to pause their tightening strategies.
The US DXY remains under pressure as clouds continue to
gather over the US economy and investors abandon the
USD as a safe haven destination. A break below 85.0 clearedthe way for a decline towards trendline support in the 83.13
area, a level that may come under scrutiny next week as
markets take stock of mixed June employment report and
the S&P gravitates closer towards 1,000.
Risk reversals moved quite sharply this week illustrating the
swing in sentiment away from the USD. Moves in USD/CHF
and USD/JPY specifically are venturing into extreme levels
and point to the danger of a counter-trend move as percentile
ranks of 20% or lower are reached. EUR/USD and GBP/USD
reversals moved further into territory last seen in late April
and early May. Both risk reversals for EUR/USD and GBP/
USD broke above -2.0. Implied 1mth/1y vol curves stayed
within tight ranges observed since mid-June for EUR/GBP
and EUR/USD. Volatility perked up in dramatic fashion across
the curve for EUR/CHF crosses, reaching new all time-highs
in the 1-year maturity (10.43).
FX correlationsMarket correlations are shown on pages 10-12. 1-month rolling
correlations are plotted for G-10 FX against interest rate
spreads, S&P 500 and commodities (represented through the
CRB index).
G10 correlations with 2y interest rate differentials stayed at
statistically significant levels for AUD/JPY and USD/CAD and
rose markedly for AUD/USD. The fall in US 2y yields to new
historic lows below 0.60% is weighing on the USD. With the
exception of AUD/JPY, 10y spreads are statistically irrelevant.
The correlation of GBP/USD with the S&P sank below zero to
-0.28, but stayed elevated for EUR/JPY and AUD/JPY. A declinein the correlation of GBP/USD with the CRB index has also
been observed and is a key development to bear in mind as
we weigh up the market and macro factors for short-term
direction of the cross. The downtrend for the CRB index was
re-established and puts a test of 250 on the radar next week,
potentially diverting flows from AUD/USD.
We saw confirmation of our observation here last week that
the USD is showing increased sensitivity to weak macro
data. Plunging home sales, weak consumer confidence
and factory orders point to a stalling of economic
momentum in late Q2, a development that has left the
USD bruised against some of its main G10 peers, and
sparking an unwinding of long speculat ive USD
positions. Next week brings the ISM non-manufacturing
index for June, forecast at 55.0 vs 55.4 last.
AUDUSD USDCAD EURUSD GBPUSD USDJPY AUDJPY EURJPY
2 YR SPD 0.89 0.86 0.69 0.43 0.87 0.89 -0.22
10 YR SPD 0.32 -0.18 0.65 0.50 0.70 0.85 0.18
S&P500 0.51 -0.89 0.11 -0.28 0.61 0.90 0.85
Gold 0.45 -0.34 0.01 0.07 -0.04 0.39 -0.03
Oil 0.91 -0.65 0.51 0.51 -0.22 0.71 0.23
Relative Yield Curve 0.88 0.87 0.18 -0.29 -0.15 0.49 -0.64
CRB 0.94 -0.63 0.70 0.59 -0.28 0.69 0.33
8/9/2019 Lloyds TSB JUL 02 FX Strategy Weekly
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FX & Commodity Futures Positioning
Data from the major US futures & options exchanges are released each Friday evening and report positions up to
the close of business on the previous Tuesday. Traders are classified as either commercial or non-commercial. The
positioning of the non-commercial traders can be used as a proxy for the speculative side of the market. Extreme
net long or net short positions are taken as an indication of the markets vulnerability to a sharp reversal. For a
squeeze to occur, however, a separate catalyst such as a piece of fundamental news or a breach of a key technical
level is usually required.
5
EUR/USD
-140,000-120,000
-100,000-80,000
-60,000-40,000-20,000
020,000
40,00060,000
06-1003-1012-0909-09
contracts
1.18
1.23
1.28
1.33
1.38
1.43
1.48
1.53
$
Net-Long Non-Commercial Posit ions (CME) Spot Rate
GBP/USD
-100,000
-80,000
-60,000
-40,000
-20,000
0
06-1003-1012-0909-09
contracts
1.30
1.40
1.50
1.60
1.70
1.80
$
Net-Long Non-Commercial Posit ions (CME) Spot Rate
USD/CHF
-30,000
-20,000
-10,000
0
10,000
20,000
06-1003-1012-0909-09
contracts
1.00
1.05
1.10
1.15
1.20
SFr
Net-Long Non-Commercial Posit ions (CME) Spot Rate
USD/JPY
-80,000
-40,000
0
40,000
80,000
06-1003-1012-0909-09
contracts
85
90
95
100
JPY
Net-Long Non-Commercial Posit ions (CME) Spot Rate
USD/CAD
-80,000
-70,000
-60,000
-50,000
-40,000
-30,000
-20,000
-10,000
0
06-1003-1012-0909-09
contracts
0.90
0.95
1.00
1.05
1.10
1.15
1.20
C$
Net-Long Non-Commercial Posit ions (CME) Spot Rate
AUD/USD
0
20,000
40,000
60,000
80,000
100,000
06-1003-1012-0909-09
contracts
0.75
0.80
0.85
0.90
0.95
$
Net-Long Non-Commercial Posit ions (CME) Spot Rate
GOLD
0
50,000
100,000
150,000
200,000
250,000
300,000
06-1003-1012-0909-09
contracts
800
900
1000
1100
1200
1300
$
Net-Long Non-Commercial Posit ions (CME) Spot Rate
SILVER
0
10,000
20,000
30,000
40,000
50,000
60,000
06-1003-1012-0909-09
contracts
12
13
14
15
16
17
18
19
20
$
Net-Long Non-Commercial Posit ions (CME) Spot Rate
OIL (NYMEX WTI)
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
06-1003-1012-0909-09
contracts
50
55
60
65
70
75
80
85
90
$
Net-Long Non-Commercial Posit ions (CME) Spot Rate
10-YR TREASURY NOTES
-300,000
-250,000
-200,000
-150,000
-100,000
-50,000
0
06-1003-1012-0909-09
contracts
112
114
116
118
120
122
124
Net-Long Non-Commercial Posit ions (CME) Spot Rate
3-month Eurodollar Future
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
06-1003-1012-0909-09
contracts
99.1
99.2
99.3
99.4
99.5
99.6
99.7
99.8
Net-Long Non-Commercial Posit ions (CME) Spot Rate
EUR/GBP (derived)
-40,000
0
40,000
80,000
120,000
160,000
06-1003-1012-0909-09
contracts
0.82
0.84
0.86
0.88
0.90
0.92
0.94
Net-Long Non-Commercial Posit ions (CME) Spot Rate
EUR/CHF (derived)
-150,000
-100,000
-50,000
0
50,000
06-1003-1012-0909-09
contracts
1.40
1.42
1.44
1.46
1.48
1.50
1.52
1.54
SFr
Net-Long Non-Commercial Posit ions (CME) Spot Rate
USD POSITIONING
-40
-20
0
20
40
06-07 12-07 06-08 12-08 06-09 12-09 06-10
$ bn
70
75
80
85
90
SUM (INDIVUAL CURRENCY PAIRS) - LHS
DXY - spot ( RHS)
S&P 500 Future
-80,000
-60,000
-40,000
-20,000
0
20,000
06-1003-1012-0909-09
contracts
800
900
1000
1100
1200
1300
Net-Long Non-Commercial Posit ions (CME) Spot Rate
8/9/2019 Lloyds TSB JUL 02 FX Strategy Weekly
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FX Options: Risk Reversal Skews
The risk reversal skew is the difference in volatility between similar out-of-the-money call and out-of-the-money put
options. A positive risk reversal means that the implied volatility (used for pricing) of the call is greater than that of
the put. In this section, the skew is based on 1-month 25 delta call and put options. The skew has been analysed over
a one-year period, with the positioning ranked and charted (in red) underneath the skew. If the skew and positioning
are towards an extreme (we use above 75% or below 25% for the percentile rank), the risk of a contra-trend move
in the underlying spot rate is high.
6
0%
20%
40%
60%
80%
100%
percentilerank
EURUSD
-4.0
-3.0
-2.0
-1.0
0.0
1.0
01Sep09
01Nov09
01Jan10
01Mar10
01May10
01Jul10
25deltaskew
GBPUSD
-4.0
-3.0
-2.0
-1.0
0.0
01Sep09
01Nov09
01Jan10
01Mar10
01May10
01Jul10
25d
eltaskew
AUDUSD
-8.0
-6.0
-4.0
-2.0
0.0
01Sep09
01Nov09
01Jan10
01Mar10
01May10
01Jul10
25d
eltaskew
0%
20%
40%
60%
80%
100%
percentilerank
0%
20%
40%
60%
80%
100%
percentilerank
USDSEK
-3.00
-2.00
-1.00
0.00
1.00
2.00
3.00
4.00
01Sep09
01Nov09
01Jan10
01Mar10
01May10
01Jul10
25deltaskew
USDNOK
-3.00
-2.00
-1.00
0.00
1.00
2.00
3.00
4.00
01Sep09
01Nov09
01Jan10
01Mar10
01May10
01Jul10
25deltaskew
USDJPY
-4
-4
-3
-3
-2
-2
-1
-1
0
01Sep09
01Nov09
01Jan10
01Mar10
01May10
01Jul10
25deltaskew
0%
20%
40%
60%
80%
100%
percentilerank
0%
20%
40%
60%
80%
100%
percentilerank
0%
20%
40%
60%
80%
100%
percentilerank
NZDUSD
-8.00
-6.00
-4.00
-2.00
0.00
01Sep09
01Nov09
01Jan10
01Mar10
01May10
01Jul10
25deltaskew
USDCAD
-1.00
0.00
1.00
2.00
3.00
4.00
01Sep09
01Nov09
01Jan10
01Mar10
01May10
01Jul10
25deltaskew
USDCHF
-1.00
-0.50
0.00
0.50
1.00
1.50
2.00
01Sep09
01Nov09
01Jan10
01Mar10
01May10
01Jul10
25deltaskew
0%
20%
40%
60%
80%
100%
percentilerank
0%
20%
40%
60%
80%
100%
percentilerank
0%
20%
40%
60%
80%
100%
percentilerank
8/9/2019 Lloyds TSB JUL 02 FX Strategy Weekly
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FX Options: Implied volatility
Implied volati lity is an input that is required when an option has to be priced. A higher implied volatili ty would result
in a higher option price, if other factors were unchanged. Implied volatility is traded in the markets and is therefore
also dependent upon supply and demand for options. In periods of uncertainty or illiquidity, implied volatility will climb
higher. One-month and one-year implied volatility is shown in the charts below.
7
EURUSD
9
11
13
15
17
19
21
02
Jul09
02
O
ct09
02
Jan
10
02
Apr10
02
Jul10
%
1-month 1-yr
GBPUSD
9
11
13
15
17
19
21
02
Jul09
02
O
ct09
02
Jan
10
02
Apr10
02
Jul10
%
1-month 1-yr
AUDUSD
8
10
12
14
16
18
20
22
24
26
28
02
Jul09
02
O
ct09
02
Jan
10
02
Apr10
02
Jul10
%
1-month 1-yr
NZDUSD
11
13
15
17
19
2123
25
27
29
02
Jul09
02
O
ct09
02
Jan
10
02
Apr10
02
Jul10
%
1-month 1-yr
USDCAD
9
11
13
15
17
19
21
02
Jul09
02
O
ct09
02
Jan
10
02
Apr10
02
Jul10
%
1-month 1-yr
USDCHF
9
10
11
12
13
14
15
16
02
Jul09
02
O
ct09
02
Jan
10
02
Apr10
02
Jul10
%
1-month 1-yr
USDSEK
10
12
14
16
18
20
22
2426
02
Jul09
02
O
ct09
02
Jan
10
02
Apr10
02
Jul10
%
1-month 1-yr
USDNOK
11
12
13
14
15
16
17
18
1920
02
Jul09
02
O
ct09
02
Jan
10
02
Apr10
02
Jul10
%
1-month 1-yr
USDJPY
9
10
11
12
13
14
15
16
17
1819
02
Jul09
02
O
ct09
02
Jan
10
02
Apr10
02
Jul10
%
1-month 1-yr
8/9/2019 Lloyds TSB JUL 02 FX Strategy Weekly
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Economic Data Surprises
The charts below show relative economic data surprises against historical FX spot rates. The economic data surprises
indice are provided by Citigroup. They are defined as weighted standard deviations of data surprises actual
releases vs. Bloomberg survey median. Relative data surprises between two countries have been calculated and
graphed below.
8
EURUSD
-150
-100
-50
0
50
100
150
02Jul10
05May10
08Mar10
07Jan10
10Nov09
11Sep09
15Jul09
SurpriseIndex
1.18
1.23
1.28
1.33
1.38
1.43
1.48
SpotRate
Economic Data Surprise Spread (RHS) Spot Rate (LHS)
USDJPY
-250
-200
-150
-100
-50
0
50
100
150
200
250
02Jul10
05May10
08Mar10
07Jan10
10Nov09
11Sep09
15Jul09
SurpriseIndex
85
87
89
91
93
95
97
99
SpotRate
Economic Data Surprise Spread (RHS) Spot Rate (LHS)
GBPUSD
-100
-50
0
50
100
150
200
02J
ul10
05M
ay10
08M
ar10
07J
an10
10N
ov09
11S
ep09
15J
ul09
SurpriseIndex
1.40
1.45
1.50
1.55
1.60
1.65
1.70
1.75
1.80
SpotRate
Economic Data Surprise Spread (RHS) Spot Rate (LHS)
USDCAD
-250
-200
-150
-100
-50
0
50
100
150
200
250
02Jul1
0
05May
10
08Mar
10
07Jan10
10Nov
09
11Sep
09
15Jul0
9
SurpriseIndex
1.00
1.02
1.04
1.06
1.08
1.10
1.12
1.14
1.16
1.18
SpotRate
Economic Data Surprise Spread (RHS) Spot Rate (LHS)
USDSEK
-200
-150
-100
-50
0
50
100
150
02/07/10
05/05/10
08/03/10
07/01/10
10/11/09
11/09/09
15/07/09
SurpriseIndex
6.0
6.5
7.0
7.5
8.0
8.5
SpotRate
Economic Data Surprise Spread (RHS) Spot Rate (LHS)
USDCHF
-250
-200
-150
-100
-50
0
50
100
02Jul1
0
05May
10
08Mar
10
07Jan
10
10Nov
09
11Sep
09
15Jul0
9
SurpriseIndex
1.00
1.02
1.04
1.06
1.08
1.10
1.12
1.14
1.16
1.18
SpotRate
Economic Data Surprise Spread (RHS) Spot Rate (LHS)
AUDUSD
-100
-50
0
50
100
150
200
250
02J
ul10
05M
ay10
08M
ar10
07J
an10
10N
ov09
11S
ep09
15J
ul09
SurpriseIndex
0.55
0.60
0.65
0.70
0.75
0.80
0.85
0.90
0.95
1.00
SpotRate
Economic Data Surprise Spread (RHS) Spot Rate (LHS)
NZDUSD
-150
-100
-50
0
50
100
150
02Jul1
0
05May
10
08Mar
10
07Jan10
10Nov
09
11Sep
09
15Jul0
9
SurpriseIndex
0.45
0.50
0.55
0.60
0.65
0.70
0.75
0.80
SpotRate
Economic Data Surprise Spread (RHS) Spot Rate (LHS)
USDNOK
-100
-50
0
50
100
150
02/07/10
05/05/10
08/03/10
07/01/10
10/11/09
11/09/09
15/07/09
SurpriseIndex
5.5
5.7
5.9
6.1
6.3
6.5
6.7
6.9
SpotRate
Economic Data Surprise Spread (RHS) Spot Rate (LHS)
8/9/2019 Lloyds TSB JUL 02 FX Strategy Weekly
9/15
Interest Rate Spreads vs. FX
The charts below show interest rate spreads plotted against historical FX spot rates. The spreads are calculated
using two-year interest rate swaps. A one-month rolling correlation (between the spot rate and the interest rate
spread) is shown to identify time periods when interest rate spreads are driving FX movements.
9
EURUSD
-0.1
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
02Jul10
21Apr10
08Feb10
26Nov09
15Sep09
03Jul09
2Y
RateSpread
1.18
1.23
1.28
1.33
1.38
1.43
1.48
1.53
SpotRate
2Y Rate Spread (RHS)
Spot Rate (LHS)
USDJPY
0.0
0.2
0.4
0.6
0.8
1.0
1.2
02
Jul10
21
Apr10
08
Feb10
26
Nov09
15
Sep09
03
Jul09
2Y
RateSpread
85
87
89
91
93
95
97
99
SpotRate
2Y Rate Spread (RHS)
Spot Rate (LHS)
1
GBPUSD
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
02Jul10
21Apr10
08Feb10
26Nov09
15Sep09
03Jul09
2Y
RateSpread
1.30
1.35
1.40
1.45
1.50
1.55
1.60
1.65
1.70
1.75
SpotRate
2Y Rate Spread (RHS)
Spot Rate (LHS)
USDCAD
-1.2
-1.0
-0.8
-0.6
-0.4
-0.2
0.0
0.2
0.4
02Jul10
21Apr10
08Feb10
26Nov09
15Sep09
03Jul09
2Y
RateSpread
0.90
0.95
1.00
1.05
1.10
1.15
1.20
SpotRate
2Y Rate Spread (RHS)
Spot Rate (RHS)
USDSEK
-0.9-0.8
-0.7-0.6-0.5
-0.4
-0.3-0.2
-0.10.0
0.10.2
02
Jul10
21
Apr10
08
Feb10
26
Nov09
15
Sep09
03
Jul09
2Y
RateSpread
5.5
6.0
6.5
7.0
7.5
8.0
8.5
SpotRate
2Y Rate Spread (RHS)
Spot Rate (LHS)
USDCHF
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
02Jul10
21Apr10
08Feb10
26Nov0
9
15Sep09
03Jul09
2Y
RateSpread
0.95
1.00
1.05
1.10
1.15
1.20
1.25
1.30
SpotRate
2Y Rate Spread (RHS)
Spot Rate (LHS)
AUDUSD
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
02Jul10
21Apr10
08Feb10
26Nov09
15Sep09
03Jul09
2Y
RateSpread
0.55
0.60
0.65
0.70
0.75
0.80
0.85
0.90
0.95
1.00
SpotRate
2Y Rate Spread (RHS)
Spot Rate (LHS)
NZDUSD
1.0
1.5
2.0
2.5
3.0
3.5
4.0
02Jul10
21Apr10
08Feb10
26Nov09
15Sep09
03Jul09
2Y
RateSpread
0.45
0.50
0.55
0.60
0.65
0.70
0.75
0.80
SpotRate
2Y Rate Spread (RHS)
Spot Rate (LHS)
Correlation-1
0
1
Correlation-1
0
1
Correlation
-1
0
1
Correlation-1
0
1
Correlation-1
0
1
Correlation-1
0
1
Correlation-1
0
1
Correlation-1
0
1
USDNOK
-2.6
-2.4
-2.2
-2.0
-1.8
-1.6
-1.4
-1.2
-1.0
02
Jul10
21
Apr10
08
Feb10
26
Nov09
15
Sep09
03
Jul09
2Y
RateSpread
4.5
5.0
5.5
6.0
6.5
7.0
7.5
SpotRate
2Y Rate Spread (RHS)
Spot Rate (LHS)
Correlation-1
0
1
8/9/2019 Lloyds TSB JUL 02 FX Strategy Weekly
10/15
S&P500 vs. FX
The charts below show the S&P500 plotted against historical FX spot rates. A one-month rolling correlation (between
the spot rate and equity index) is shown to identify time periods when the two series are moving in tandem.
10
EURUSD
600
700
800
900
1000
1100
1200
1300
01Jul10
20Apr10
05Feb10
25Nov09
14Sep09
02Jul09
S&P500
1.18
1.23
1.28
1.33
1.38
1.43
1.48
1.53
SpotRate
S&P500
Spot Rate (LHS)
USDJPY
600
700
800
900
1000
1100
1200
1300
01Jul10
20Apr10
05Feb10
25Nov09
14Sep09
02Jul09
S&P500inverted
85
87
89
91
93
95
97
99
S
potRate
S&P500
Spot Rate (LHS)
GBPUSD
600
700
800
900
1000
1100
1200
1300
01Jul10
20Apr10
05Feb10
25Nov09
14Sep09
02Jul09
S&P500
1.30
1.35
1.40
1.45
1.50
1.55
1.60
1.65
1.70
1.75
SpotRate
S&P500
Spot Rate (LHS)
USDCAD
600
700
800
900
1000
1100
1200
1300
01Jul10
20Apr10
05Feb10
25Nov09
14Sep09
02Jul09
S&P500inverted
1.00
1.02
1.04
1.06
1.08
1.10
1.12
1.14
1.16
1.18
SpotRate
S&P500
Spot Rate (RHS)
USDSEK
600
700
800
900
1000
1100
1200
1300
01Jul10
20Apr10
05Feb10
25Nov09
14Sep09
02Jul09
S&P500inverted
5.5
6.0
6.5
7.0
7.5
8.0
8.5
SpotRate
S&P500
Spot Rate (LHS)
USDCHF
600
700
800
900
1000
1100
1200
1300
01Jul10
20Apr10
05Feb10
25Nov09
14Sep09
02Jul09
S&P500inverted
0.95
1.00
1.05
1.10
1.15
1.20
1.25
1.30
SpotRate
S&P500
Spot Rate (LHS)
AUDUSD
600
700
800
900
1000
1100
1200
1300
01Jul10
20Apr10
05Feb10
25Nov09
14Sep09
02Jul09
S&P500
0.55
0.60
0.65
0.70
0.75
0.80
0.85
0.90
0.95
1.00
SpotRate
S&P500
Spot Rate (LHS)
NZDUSD
600
700
800
900
1000
1100
1200
1300
01Jul10
20Apr1
0
05Feb1
0
25Nov0
9
14Sep0
9
02Jul09
S&P500
0.45
0.50
0.55
0.60
0.65
0.70
0.75
0.80
SpotRate
S&P500
Spot Rate (LHS)
Correlation-1
0
1
Correlation-1
0
1
Correlation
-1
0
1
Correlation-1
0
1
Correlation
-1
0
1
Correlation
-1
0
1
Correlation-1
0
1
Correlation-1
0
1
USDNOK
600
700
800
900
1000
1100
1200
1300
01Jul10
20Apr10
05Feb10
25Nov09
14Sep09
02Jul09
S&P50
0inverted
5.0
5.5
6.0
6.5
7.0
7.5
SpotRate
S&P500
Spot Rate (LHS)
Correlation
-1
0
1
8/9/2019 Lloyds TSB JUL 02 FX Strategy Weekly
11/15
Commodities vs. FX
The charts below show oil prices plotted against historical FX spot rates. A one-month rolling correlation (between
the spot rate and the commodity series) is shown to identify time periods when the two series are moving in tandem.
*All charts are sourced to Lloyds TSB Corporate Markets Research, Bloomberg, Datastream and Citigroup.
11
EURUSD
20
30
40
50
60
70
80
90
100
02Jul10
21Apr10
08Feb10
26Nov09
15Sep09
03Jul09
OIL
1.18
1.23
1.28
1.33
1.38
1.43
1.48
1.53
SpotRate
Oil (RHS)
Spot Rate (LHS)
USDJPY
20
30
40
50
6070
80
90
100
02Jul10
21Apr10
08Feb10
26Nov09
15Sep09
03Jul09
O
IL
85
87
89
91
93
95
97
99
SpotRate
Oil (RHS)
Spot Rate (LHS)
GBPUSD
20
30
40
50
60
70
80
90
100
02Jul10
21Apr10
08Feb10
26Nov09
15Sep09
03Jul09
OIL
1.30
1.35
1.40
1.45
1.50
1.55
1.60
1.65
1.70
1.75
SpotRate
Oil (RHS)
Spot Rate (LHS)
USDCAD
20
30
40
50
60
70
80
90
100
02Jul10
21Apr10
08Feb10
26Nov09
15Sep09
03Jul09
OIL
1.00
1.02
1.04
1.06
1.08
1.10
1.12
1.14
1.16
1.18
SpotRate
Oil (RHS)
Spot Rate (RHS)
USDSEK
20
30
40
50
6070
80
90
100
02Jul10
21Apr10
08Feb10
26Nov09
15Sep09
03Jul09
OIL
6.5
6.7
6.9
7.1
7.3
7.5
7.7
7.9
8.1
8.3
Spot
Rate
Oil (RHS)
Spot Rate (LHS)
USDCHF
20
30
40
50
60
70
80
90100
02Jul10
21Apr10
08Feb10
26Nov09
15Sep09
03Jul09
OIL
0.95
1.00
1.05
1.10
1.15
1.20
1.25
1.30
SpotRate
Oil (RHS)
Spot Rate (LHS)
AUDUSD
20
30
40
50
60
70
80
90
100
02Jul10
21Apr10
08Feb10
26Nov09
15Sep09
03Jul09
OIL
0.55
0.60
0.65
0.70
0.75
0.80
0.85
0.90
0.95
1.00
SpotRate
Oil (RHS)
Spot Rate (LHS)
NZDUSD
20
30
40
50
60
70
80
90
100
02Ju
l10
21Ap
r10
08Fe
b10
26No
v09
15Se
p09
03Ju
l09
OIL
0.45
0.50
0.55
0.60
0.65
0.70
0.75
0.80
SpotRate
Oil (RHS)
Spot Rate (LHS)
Correlation-1
0
1
Correlation-1
0
1
Correlation
-1
0
1
Correlation-1
0
1
Correlation
-1
0
1
Correlation
-1
0
1
Correlation-1
0
1
Correlation-1
0
1
USDNOK
20
30
40
50
6070
80
90
100
02Jul10
21Apr10
08Feb10
26Nov09
15Sep09
03Jul09
OIL
5.0
5.5
6.0
6.5
7.0
7.5
SpotR
ate
Oil (RHS)
Spot Rate (LHS)
Correlation
-1
0
1
8/9/2019 Lloyds TSB JUL 02 FX Strategy Weekly
12/15
Market Review
Short-term G-10 FX Charts
12
GBP/USD
1.42
1.44
1.46
1.48
1.50
1.52
1.54
0 1/0 6 /1 0 0 8/0 6 /1 0 1 5/0 6/1 0 2 2/0 6 /1 0 2 9/0 6/1 0
EUR/USD
1.19
1.20
1.21
1.22
1.23
1.24
1.25
1.26
0 1/0 6/1 0 0 8/ 06 /1 0 1 5 /0 6/1 0 2 2/0 6/ 10 2 9/0 6 /1 0
EUR/GBP
0.80
0.81
0.81
0.82
0.82
0.83
0.83
0.84
0.84
0 1/ 06 /1 0 0 8 /0 6/1 0 1 5/0 6/ 10 2 2/0 6 /1 0 2 9/0 6/1 0
USD/JPY
87
88
89
90
91
92
93
0 1/0 6/1 0 0 8/0 6/1 0 1 5/0 6/1 0 2 2/0 6/1 0 2 9/0 6 /1 0
AUD/USD
0.80
0.81
0.82
0.83
0.84
0.85
0.86
0.87
0.88
0.89
0 1/ 06 /1 0 0 8 /0 6/1 0 1 5/0 6/1 0 2 2/ 06 /1 0 2 9/0 6/1 0
NZD/USD
0.66
0.67
0.68
0.69
0.70
0.71
0.72
0 1/0 6/1 0 0 8/0 6 /1 0 1 5 /0 6 /1 0 2 2/0 6/1 0 2 9 /0 6/1 0
USD/NOK
6.28
6.33
6.38
6.43
6.48
6.53
6.58
6.63
6.68
6.73
0 1/0 6/1 0 0 8 /0 6/1 0 1 5/0 6/ 10 2 2/ 06 /1 0 2 9/0 6/1 0
USD/SEK
7.60
7.65
7.70
7.75
7.80
7.85
7.90
7.95
8.00
8.05
8.10
0 1/0 6/1 0 0 8/0 6/ 10 1 5/0 6/1 0 2 2/0 6/ 10 2 9/ 06 /1 0
USD/CHF
1.04
1.06
1.08
1.10
1.12
1.14
1.16
1.18
0 1/0 6/1 0 0 8 /0 6/1 0 1 5/0 6/1 0 2 2/0 6 /1 0 2 9/0 6/1 0
USD/CAD
1.01
1.02
1.03
1.04
1.05
1.06
1.07
0 1/0 6/1 0 0 8/0 6/ 10 1 5 /0 6/1 0 2 2/0 6/1 0 2 9/0 6 /1 0
8/9/2019 Lloyds TSB JUL 02 FX Strategy Weekly
13/15
Medium-term G-10 FX Charts
13
GBP/USD
1.40
1.45
1.50
1.55
1.60
1.65
1.70
1.75
J u l- 09 S ep - 09 N o v- 0 9 J a n- 10 Ma r -1 0 Ma y- 1 0 J u l- 1 0
EUR/USD
1.18
1.23
1.28
1.33
1.38
1.43
1.48
1.53
J ul - 09 S ep - 09 N o v- 0 9 J a n- 1 0 Ma r -1 0 Ma y- 1 0 J u l- 10
EUR/GBP
0.80
0.82
0.84
0.86
0.88
0.90
0.92
0.94
0.96
J u l- 0 9 S e p- 0 9 N o v- 09 J an -1 0 Ma r- 1 0 Ma y- 1 0 J u l- 1 0
USD/JPY
85
87
89
91
93
95
97
99
101
J ul -0 9 S ep -0 9 N ov- 09 J an -1 0 Ma r- 10 Ma y- 10 J ul -1 0
AUD/USD
0.75
0.77
0.79
0.81
0.83
0.85
0.87
0.89
0.91
0.93
0.95
J ul -0 9 S ep -0 9 N ov- 09 J an -1 0 Ma r- 10 Ma y- 10 J ul -1 0
NZD/USD
0.60
0.62
0.64
0.66
0.68
0.70
0.72
0.74
0.76
0.78
J ul -0 9 S ep -0 9 N ov- 09 J an -1 0 Ma r- 10 Ma y- 10 J ul -1 0
USD/NOK
5.45
5.65
5.85
6.05
6.25
6.45
6.65
6.85
J ul -0 9 S ep -0 9 N ov- 09 J an -1 0 Ma r- 10 Ma y- 10 J ul -1 0
USD/SEK
6.50
6.70
6.90
7.10
7.30
7.50
7.70
7.90
8.10
J ul -0 9 S ep -0 9 N ov- 09 J an -1 0 Ma r- 10 Ma y- 10 J ul -1 0
USD/CHF
0.98
1.00
1.02
1.04
1.06
1.08
1.10
1.12
1.14
1.16
1.18
J ul -0 9 S ep -0 9 N ov- 09 J an -1 0 Ma r- 10 Ma y- 10 J ul -1 0
USD/CAD
0.95
1.00
1.05
1.10
1.15
1.20
J ul -0 9 S ep -0 9 N ov- 09 J an -1 0 Ma r- 10 Ma y- 10 J ul -1 0
8/9/2019 Lloyds TSB JUL 02 FX Strategy Weekly
14/15
FX Snapshot
Currency performance vs. USD
Currency performance vs. GBP
Currency performance vs. EUR
14
Weekly Currency Performance vs. USD
-2.61
-2.47
-2.12
0.01
0.83
1.27
1.34
1.55
2.50
-3 -2 -1 0 1 2 3
AUD
NZD
CAD
NOK
SEK
EUR
GBP
JPY
CHF
%
Monthly Currency Performance vs. USD
-0.06
0.96
1.73
1.85
1.88
3.52
3.55
7.52
-0.97
-2 0 2 4 6 8
CAD
NOK
AUD
SEK
EUR
NZD
JPY
GBP
CHF
%
12month Currency Performance vs. USD
-10.77
-7.38
-0.58
1.25
1.55
6.65
8.45
8.83
10.23
-15 -10 -5 0 5 10 15
EUR
GBP
NOK
SEK
CHF
AUD
JPY
CAD
NZD
%
Weekly Currency Performance vs. GBP
-4.05
-3.89
-3.47
-1.34
-1.33
-0.45
-0.07
0.23
1.22
-5 -4 -3 -2 -1 0 1 2
AUD
NZD
CAD
USD
NOK
SEK
EUR
JPY
CHF
%
Monthly Currency Performance vs. GBP
-4.54
-3.61
-3.55
-2.55
-1.72
-1.63
-1.61
0.10
4.26
-6 -4 -2 0 2 4 6
CAD
NOK
USD
AUD
SEK
NZD
EUR
JPY
CHF
%
12 month Currency Performance vs. GBP
-3.66
6.86
7.38
8.51
8.82
13.16
15.20
15.56
15.99
-5 0 5 10 15 20
EUR
NOK
USD
SEK
CHF
AUD
JPY
CAD
NZD
%
Weekly Currency Performance vs. EUR
-3.97
-3.82
-3.40
-1.27
-1.26
-0.44
0.07
0.31
1.29
-5 -4 -3 -2 -1 0 1 2
AUD
NZD
CAD
USD
NOK
SEK
GBP
JPY
CHF
%
Monthly Currency Performance vs. EUR
-2.83
-1.91
-1.85
-0.87
-0.10
0.04
1.61
1.75
5.82
-4 -2 0 2 4 6 8
CAD
NOK
USD
AUD
SEK
NZD
GBP
JPY
CHF
%
12 month Currency Performanc e vs. EUR
3.66
10.28
10.77
11.87
12.17
16.35
18.32
18.65
19.06
0 5 10 15 20 25
GBP
NOK
USD
SEK
CHF
AUD
JPY
CAD
NZD
%
8/9/2019 Lloyds TSB JUL 02 FX Strategy Weekly
15/15
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