FX Market Updatec3352932.r32.cf0.rackcdn.com/pdf97f0e5a7f4d51edb0b... · Looking at the signals from our short-term financial models, we currently observe the biggest misalignments

Important disclosures and certifications are contained from page 21 of this report. www.danskeresearch.com

Investment Research

Expected change in EUR/XXX from lower peripheral yields vs actual spot change in April

Expected change in EUR/XXX is calculated using current correlations and assuming all else being equal. If currencies are below

the 45 degree line it indicates that EUR/XXX has increased less than expected given an isolated yield spread tightening of

80bps on Italian and Spanish government bonds relative to Germany.

Source: Bloomberg, Danske Bank Markets calculations

What stands out

10Y Italian and Spanish sovereign bond spreads to Germany narrowed by about 80bp

in April and are now at their lowest levels since 2011. However, as illustrated in the

chart above, which shows the expected increase in spot given an 80bp yield spread

tightening in Italy and Spain government bonds relative to Germany versus the actual

change in spot levels during April, most EUR crosses have actually increased less

than expected given the decline in peripheral yields. Thus, according to our models,

the lower peripheral yields point towards further EUR strength.

Looking at the signals from our short-term financial models, we currently observe the

biggest misalignments in AUD/CAD, which trades 2.2 standard deviations below our

models’ estimate. While AUD has suffered, NZD has performed relatively well over

the past month and NZD has reached overbought territory with NZD/USD, trading 1.4

standard deviations above and AUD/NZD 1.6 standard deviations below the models’

estimate. After a more than 2% decline over the past week, USD/CAD also looks

increasingly oversold, according to our models.

However, while our short-term models currently indicate that CAD and NZD are

rallying and the AUD sell-off looks increasingly stretched, we note that pricing does

not look particularly stretched from a technical point of view. According to the ‘Spot

overview’ on page 2, the AUD/NZD RSI level has dropped below 30, which is

normally an indication that the risk of a near-term correction has increased. However,

given that the cross is still in a down trend according to ‘DMI analysis’, we prefer to

look for better entry levels before considering adding long AUD/NZD spot positions.

Implied FX volatility has, in general, traded lower over the past couple of weeks and

when evaluated by the historical differences between implied and realised volatility,

we find that the 3M tenor currently looks cheap. When adjusted for volatility, risk

reversals in all examined crosses trade within 2 standard deviations of their historical

averages. The most extreme skews are generally seen in JPY and TRY crosses, with

TRY/JPY as the most expensive.

Actu

al ch

ange

in spo

t lev

el in

Apr

il 201

3

Expected change based on 80bp spread tightening

USD

GBPCHF

JPY

SEK

NOK CAD

NZD

AUD

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 9.00% 10.00%

Today’s key points

[Text]

01 May 2013

Contents

Spot overview ...............................................................2

Forecasts and market pricing ..................3

Short-term financial models ......................5

Correlation monitor ..............................................9

Carry monitor .......................................................... 11

Volatility summary ............................................ 12

Range-trading monitor ................................. 15

Option market positioning ........................ 16

Central bank overview .................................. 18

FX trade overview ............................................... 19

FX Market Update provides a

quantitative overview of the currency

market.

FX Market Update

Lower peripheral yields point to further EUR strength

Senior Analyst Morten Helt +45 45 12 85 18 [email protected] www.danskeresearch.com Bloomberg: DRFX <GO>

45 degree line

EUR crosses below the 45 degree line have increased less than expected given the decline in peripheral yields.

mailto:[email protected]

2 | 01 May 2013 www.danskeresearch.com

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FX Market Update

Spot overview

Spot overview

Top 10 overbought range-trading currency pairs Top 10 oversold range-trading currency pairs

Note: Trend direction and strength computed using ‘DMI’ analysis (range-trade defined as ADX line <25), trend support/resistance computed using ‘Trender’ algorithm,

Bollinger bands computed on 30-period window, RSI computed on 14-period window (oversold defined as <30, overbought defined as >70)

Source: Bloomberg

Spot 1M change Bollinger-bands 20-day MA 50-day MA 1M Low-High RSI

Direction Strength Sup./Res. -/+ 2 std dev

EUR/USD 1.3170 2.6% 1.2943 1.3059 1.3012 1.2746 / 1.3202 61.6

EUR/JPY 128.35 7.1% 118.30 / 133.69 128.54 124.80 119.11 / 131.12 56.5

EUR/GBP 0.8478 0.5% 0.8410 / 0.8587 0.8511 0.8560 0.8398 / 0.8637 45.6

EUR/CHF 1.2257 0.8% 1.2102 / 1.2299 1.2210 1.2232 1.213 / 1.2349 55.7

EUR/SEK 8.53 2.0% 8.4761 8.4715 8.4104 8.2972 / 8.6486 57

EUR/NOK 7.60 1.6% 7.6706 7.5628 7.5145 7.4278 / 7.702 55.6

EUR/AUD 1.2714 3.3% 1.2549 1.2599 1.2574 1.2219 / 1.2776 60.1

EUR/CAD 1.3260 1.5% 1.2961 / 1.3503 1.3303 1.3292 1.2954 / 1.3524 48

EUR/NZD 1.5369 0.3% 1.5178 / 1.5569 1.5383 1.5532 1.5081 / 1.5612 47.7

EUR/PLN 4.16 -0.3% 4.0829 / 4.2118 4.1305 4.1485 4.093 / 4.199 57.3

EUR/RUB 40.98 2.6% 39.49 / 41.67 40.89 40.35 39.94 / 41.56 55.4

EUR/TRY 2.36 1.9% 2.3278 2.3438 2.3444 2.2932 / 2.367 60.9

EUR/CZK 25.74 -0.1% 25.67 / 25.95 25.8189 25.7176 25.64 / 25.99 46.9

USD/JPY 97.46 4.4% 92.48 / 101.45 98.43 95.90 92.57 / 99.95 50.2

GBP/USD 1.5535 2.0% 1.505 / 1.552 1.5344 1.5202 1.5034 / 1.5569 66.1

USD/CHF 0.9306 -1.7% 0.923 / 0.956 0.9350 0.9401 0.9207 / 0.9527 43

USD/SEK 6.48 -0.5% 6.340 / 6.645 6.4871 6.4637 6.327 / 6.658 47.6

USD/NOK 5.77 -1.0% 5.691 / 5.918 5.7914 5.7753 5.692 / 5.937 44.9

AUD/USD 1.0358 -0.7% 1.022 / 1.056 1.0366 1.0349 1.0221 / 1.0582 50.6

USD/CAD 1.0064 -1.0% 1.007 / 1.030 1.0186 1.0215 1.0054 / 1.0294 33.5

NZD/USD 0.8572 2.2% 0.829 / 0.861 0.8490 0.8379 0.8361 / 0.8676 61.3

USD/RUB 31.11 0.1% 30.65 / 31.82 31.32 31.02 30.77 / 31.88 47.8

NOK/SEK 1.1233 0.5% 1.1085 / 1.1287 1.1202 1.1192 1.108 / 1.1307 53.8

AUD/NZD 1.2084 -2.8% 1.2203 1.2210 1.2353 1.2053 / 1.2471 28 (Oversold)

Trend

Currency pair RSI

1 GBP/USD 64.9

2 NZD/USD 61.5

3 GBP/JPY 59.0

4 CAD/JPY 57.6

5 EUR/PLN 57.1

6 GBP/CHF 57.0

7 EUR/NOK 56.5

8 NZD/JPY 56.2

9 EUR/JPY 55.7

10 EUR/CHF 55.6

Currency pair RSI

1 AUD/CAD 33.1

2 USD/CAD 33.8

3 AUD/CHF 43.6

4 USD/CHF 43.7

5 EUR/GBP 45.1

6 AUD/NOK 45.9

7 USD/NOK 46.3

8 EUR/NZD 46.3

9 USD/TRY 46.5

10 USD/PLN 46.7


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Forecasts and market pricing

Danske Bank Markets FX forecasts

Danske Bank forecasts vs forwards and consensus EUR/USD

USD/JPY EUR/GBP

EUR/CHF EUR/SEK

Note: The cone charts show confidence regions derived from option market prices. Source: Bloomberg and Danske Bank Markets calculations

Spot +1m +3m +6m +12m +1m +3m +6m +12m

Exchange rates vs EUR

USD 1.307 1.31 1.33 1.29 1.27 0.2 1.7 -1.4 -3.1JPY 127.4 130 136 136 140 1.4 6.2 6.2 9.4GBP 0.844 0.86 0.88 0.90 0.88 0.8 3.1 5.4 2.8CHF 1.224 1.23 1.23 1.24 1.24 1.2 1.3 2.2 2.3

DKK 7.46 7.46 7.46 7.46 7.46 0.1 0.1 0.2 0.2NOK 7.61 7.50 7.40 7.35 7.30 -0.2 -1.8 -2.8 -4.2SEK 8.54 8.30 8.20 8.10 8.10 -0.7 -2.0 -3.5 -4.0

Exchange rates vs USD

CAD 1.01 1.01 1.00 1.01 1.02 -1.2 -2.3 -1.5 -0.9AUD 1.03 1.05 1.07 1.04 1.00 1.0 3.4 1.1 -1.5NZD 0.86 0.85 0.86 0.82 0.80 0.4 1.9 -2.1 -3.2

Forecast Forecast vs forward outright, %

EURUSDUSDJPY

EURGBP

EURCHF

EURSEK

EURNOK

AUDUSDNZDUSD

USDCAD

EURJPY

GBPUSDEURPLN

USDTRY

-4%

-2%

0%

2%

4%

6%

-6% -4% -2% 0% 2% 4% 6% 8%

Da

nsk

e 3

M fo

reca

st v

s. c

on

sen

sus

Danske 3M forecast vs. forward

EUR/USD 1M 3M 6M 12M

Forecast (pct'ile) 1.31 (50%) 1.33 (63%) 1.29 (36%) 1.27 (32%)

Fwd. / Consensus 1.31 / 1.30 1.31 / 1.30 1.31 / 1.28 1.31 / 1.26

50% confidence int. 1.29 / 1.33 1.28 / 1.35 1.26 / 1.36 1.24 / 1.39

75% confidence int. 1.27 / 1.34 1.24 / 1.37 1.22 / 1.39 1.17 / 1.44

1.10

1.20

1.30

1.40

1.50

May-12 Aug-12 Nov-12 Feb-13 Jun-13 Sep-13 Dec-13 Apr-14

EUR/USD

75% conf. int. 50% conf.int. Forward Danske fcst Consensus fcst

USD/JPY 1M 3M 6M 12M

Forecast (pct'ile) 99.00 (70%) 102.00 (81%) 105.00 (85%) 110.00 (89%)

Fwd. / Consensus 97.45 / 97.96 97.45 / 99.64 97.45 / 102.00 97.45 / 104.55

50% confidence int. 95.20 / 99.50 93.87 / 100.68 92.44 / 101.78 90.65 / 102.97

75% confidence int. 93.60 / 101.23 91.18 / 103.56 88.80 / 105.89 85.62 / 108.69

75.0

80.0

85.0

90.0

95.0

100.0

105.0

110.0


USD/JPY


EUR/GBP 1M 3M 6M 12M

Forecast (pct'ile) 0.86 (82%) 0.88 (88%) 0.90 (90%) 0.88 (73%)

Fwd. / Consensus 0.84 / 0.85 0.85 / 0.86 0.85 / 0.86 0.85 / 0.85

50% confidence int. 0.83 / 0.86 0.83 / 0.86 0.82 / 0.87 0.81 / 0.88

75% confidence int. 0.82 / 0.86 0.81 / 0.88 0.80 / 0.89 0.78 / 0.91

0.75

0.80

0.85

0.90

0.95


EUR/GBP


EUR/CHF 1M 3M 6M 12M

Forecast (pct'ile) 1.23 (74%) 1.23 (69%) 1.24 (72%) 1.24 (67%)

Fwd. / Consensus 1.22 / 1.22 1.22 / 1.23 1.22 / 1.24 1.22 / 1.25

50% confidence int. 1.21 / 1.23 1.20 / 1.23 1.20 / 1.24 1.19 / 1.25

75% confidence int. 1.21 / 1.24 1.20 / 1.25 1.18 / 1.27 1.16 / 1.28

1.15

1.20

1.25

1.30


EUR/CHF


EUR/SEK 1M 3M 6M 12M

Forecast (pct'ile) 8.30 (8%) 8.20 (10%) 8.10 (11%) 8.10 (17%)

Fwd. / Consensus 8.55 / 8.47 8.56 / 8.38 8.58 / 8.35 8.63 / 8.29

50% confidence int. 8.43 / 8.65 8.37 / 8.73 8.32 / 8.81 8.25 / 8.92

75% confidence int. 8.35 / 8.74 8.24 / 8.88 8.13 / 9.02 7.97 / 9.22

7.75

8.00

8.25

8.50

8.75

9.00

9.25


EUR/SEK



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EUR/NOK AUD/USD

NZD/USD USD/CAD

EUR/JPY GBP/USD

EUR/PLN USD/TRY

Note: The cone charts show confidence regions derived from option market prices. Source: Bloomberg, Danske Bank Markets calculations

EUR/NOK 1M 3M 6M 12M

Forecast (pct'ile) 7.50 (21%) 7.40 (16%) 7.35 (17%) 7.30 (19%)

Fwd. / Consensus 7.62 / 7.55 7.64 / 7.45 7.67 / 7.39 7.73 / 7.34

50% confidence int. 7.52 / 7.71 7.47 / 7.79 7.43 / 7.87 7.39 / 7.99

75% confidence int. 7.44 / 7.79 7.35 / 7.92 7.27 / 8.05 7.15 / 8.25

7.00

7.25

7.50

7.75

8.00

8.25


EUR/NOK


AUD/USD 1M 3M 6M 12M

Forecast (pct'ile) 1.05 (81%) 1.07 (89%) 1.04 (60%) 1.00 (38%)

Fwd. / Consensus 1.03 / 1.04 1.03 / 1.04 1.02 / 1.04 1.01 / 1.02

50% confidence int. 1.02 / 1.05 1.01 / 1.05 0.99 / 1.06 0.97 / 1.06

75% confidence int. 1.01 / 1.05 0.98 / 1.07 0.96 / 1.08 0.91 / 1.09

0.90

0.95

1.00

1.05

1.10


AUD/USD


NZD/USD 1M 3M 6M 12M

Forecast (pct'ile) 0.85 (39%) 0.86 (56%) 0.82 (28%) 0.80 (28%)

Fwd. / Consensus 0.85 / 0.85 0.85 / 0.84 0.85 / 0.84 0.83 / 0.82

50% confidence int. 0.84 / 0.87 0.83 / 0.88 0.81 / 0.88 0.79 / 0.89

75% confidence int. 0.83 / 0.88 0.81 / 0.89 0.78 / 0.91 0.73 / 0.92

0.70

0.75

0.80

0.85

0.90

0.95


NZD/USD


USD/CAD 1M 3M 6M 12M

Forecast (pct'ile) 1.01 (49%) 1.00 (34%) 1.01 (51%) 1.02 (58%)

Fwd. / Consensus 1.01 / 1.02 1.01 / 1.02 1.02 / 1.01 1.02 / 1.00

50% confidence int. 1.00 / 1.02 0.99 / 1.03 0.99 / 1.04 0.97 / 1.05

75% confidence int. 0.99 / 1.03 0.98 / 1.05 0.97 / 1.06 0.94 / 1.09

0.90

0.95

1.00

1.05

1.10


USD/CAD


EUR/JPY 1M 3M 6M 12M

Forecast (pct'ile) 130.00 (68%) 136.00 (84%) 136.00 (77%) 140.00 (79%)

Fwd. / Consensus 127.4 / 127.7 127.4 / 129.0 127.4 / 131.2 127.4 / 131.1

50% confidence int. 123.9 / 131.0 121.8 / 133.0 120.0 / 134.9 117.4 / 137.7

75% confidence int. 120.9 / 133.6 117.2 / 137.2 113.1 / 140.8 107.8 / 145.4

9095

100105110115120125130135140145150


EUR/JPY


GBP/USD 1M 3M 6M 12M

Forecast (pct'ile) 1.52 (17%) 1.51 (21%) 1.43 (8%) 1.44 (17%)

Fwd. / Consensus 1.55 / 1.52 1.55 / 1.50 1.55 / 1.50 1.55 / 1.49

50% confidence int. 1.53 / 1.57 1.52 / 1.58 1.50 / 1.60 1.48 / 1.62

75% confidence int. 1.51 / 1.58 1.49 / 1.60 1.45 / 1.63 1.41 / 1.67

1.40

1.45

1.50

1.55

1.60

1.65

1.70


GBP/USD


EUR/PLN 1M 3M 6M 12M

Forecast (pct'ile) 4.13 (39%) 4.20 (64%) 4.20 (59%) 4.25 (62%)

Fwd. / Consensus 4.16 / 4.15 4.18 / 4.15 4.20 / 4.11 4.24 / 4.03

50% confidence int. 4.10 / 4.20 4.08 / 4.24 4.06 / 4.28 4.02 / 4.35

75% confidence int. 4.06 / 4.25 4.02 / 4.33 3.97 / 4.41 3.89 / 4.53

3.80

4.00

4.20

4.40

4.60


EUR/PLN


USD/TRY 1M 3M 6M 12M

Forecast (pct'ile) 1.79 (38%) 1.80 (48%) 1.80 (38%) 1.85 (56%)

Fwd. / Consensus 1.81 / 1.80 1.82 / 1.80 1.83 / 1.80 1.87 / 1.79

50% confidence int. 1.78 / 1.82 1.78 / 1.84 1.78 / 1.86 1.77 / 1.91

75% confidence int. 1.77 / 1.84 1.76 / 1.87 1.74 / 1.91 1.69 / 1.99

1.65

1.70

1.75

1.80

1.85

1.90

1.95

2.00


USD/TRY



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Short-term financial models

Spot deviations from model estimate

Spot deviations from model estimate

Note: Linear regression models using a 200-day rolling estimation window. 2Y swap spread is included only when spot beta is positive. Short-term financial models are

partial models, implying that there is no built-in consistency between, e.g., EUR/NOK, EUR/SEK and NOK/SEK models


-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

De

via

tio

n (s

tdev

)

Today

1W ago

2W ago

Spot above model

Spot below model

Spot Model Signal Deviation (%) Deviation (stdev)

EUR/USD 1.317 1.325 -0.6% -0.6

EUR/JPY 128.35 130.16 Oversold -1.4% -1.1

USD/JPY 97.46 95.68 1.9% 0.2

EUR/GBP 0.848 0.856 -1.0% -0.6

EUR/CHF 1.226 1.229 -0.3% -0.4

EUR/SEK 8.533 8.503 0.4% 1.0

EUR/NOK 7.596 7.578 0.2% 0.7

AUD/USD 1.036 1.036 0.0% -0.3

USD/CAD 1.006 1.018 Oversold -1.2% -1.7

NZD/USD 0.857 0.837 Overbought 2.4% 1.4

NOK/SEK 1.123 1.119 0.4% 0.8

EUR/PLN 4.165 4.163 0.0% 0.1

EUR/CZK 25.74 25.41 Overbought 1.3% 1.0

AUD/NZD 1.208 1.230 Oversold -1.7% -1.6

USD/SEK 6.480 6.446 0.5% 0.7

USD/NOK 5.768 5.746 0.4% 0.6

GBP/USD 1.554 1.553 0.0% 0.0

AUD/CAD 1.042 1.056 Very oversold -1.3% -2.2


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EUR/USD (Model estimate:1.325) EUR/USD model contributions

+/- 2 stdev Model estimate Spot

Jul12

Aug Sep Oct Nov Dec Jan13

Feb Mar Apr

1.175

1.200

1.225

1.250

1.275

1.300

1.325

1.350

1.375

1.400

1.175

1.200

1.225

1.250

1.275

1.300

1.325

1.350

1.375

1.400

EUR/USD EUR/USD

USD/JPY (Model estimate: 95.68) USD/JPY model contributions


Jul12


Feb Mar Apr

75

80

85

90

95

100

105

75

80

85

90

95

100

105USD/JPY USD/JPY

EUR/GBP (Model estimate:0.856) EUR/GBP model contributions


Jul12


Feb Mar Apr

0.760.770.780.790.800.810.820.830.840.850.860.870.880.89

0.760.770.780.790.800.810.820.830.840.850.860.870.880.89

EUR/GBP EUR/GBP

EUR/CHF (Model estimate:1.229) EUR/CHF model contributions


Jul12


Feb Mar Apr

1.100

1.125

1.150

1.175

1.200

1.225

1.250

1.275

1.300

1.100

1.125

1.150

1.175

1.200

1.225

1.250

1.275

1.300EUR/CHF EUR/CHF




-1.0%

0.0%

1.0%

2.0%

W-15 W-16 W-17 W-18

2Y swap spread 10Y swap spread Vix Oil European sovereign spread

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

W-15 W-16 W-17 W-18


-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

W-15 W-16 W-17 W-18

2Y swap spread 10Y swap spread Vix European sovereign spread

-1.0%

0.0%

1.0%

W-15 W-16 W-17 W-18



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EUR/SEK (Model estimate:8.503) EUR/SEK model contributions


Jul12


Feb Mar Apr

8.08.18.28.38.48.58.68.78.88.99.09.19.2

8.08.18.28.38.48.58.68.78.88.99.09.19.2

EUR/SEK EUR/SEK

EUR/NOK (Model estimate:7.578) EUR/NOK model contributions


Mar12

Apr May Jun Jul Aug Sep Oct Nov Dec Jan13

Feb Mar Apr

7.1

7.2

7.3

7.4

7.5

7.6

7.7

7.8

7.1

7.2

7.3

7.4

7.5

7.6

7.7

7.8EUR/NOKEUR/NOK

EUR/JPY (Model estimate:130.16) EUR/JPY model contributions


Mar12

Apr May Jun Jul Aug Sep Oct Nov Dec Jan13

Feb Mar Apr

90

95

100

105

110

115

120

125

130

135

140

90

95

100

105

110

115

120

125

130

135

140EUR/JPYEUR/JPY

GBP/USD (Model estimate:1.553) GBP/USD model contributions

+/- 2 stdev Model estimate GBP/USD

Jul12


Feb Mar Apr

1.425

1.450

1.475

1.500

1.525

1.550

1.575

1.600

1.625

1.650

1.675

1.425

1.450

1.475

1.500

1.525

1.550

1.575

1.600

1.625

1.650

1.675GBP/USD GBP/USD




-1.0%

0.0%

1.0%

W-15 W-16 W-17 W-18


-1.0%

0.0%

1.0%

W-15 W-16 W-17 W-18


-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

W-15 W-16 W-17 W-18


-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

W-15 W-16 W-17 W-18



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USD/CAD (Model estimate:1.018) USD/CAD model contributions


Jul12


Feb Mar Apr

0.95

0.96

0.97

0.98

0.99

1.00

1.01

1.02

1.03

1.04

1.05

0.95

0.96

0.97

0.98

0.99

1.00

1.01

1.02

1.03

1.04

1.05USD/CAD USD/CAD

AUD/USD (Model estimate:1.036) AUD/USD model contributions


Jul12


Feb Mar Apr

0.950

0.975

1.000

1.025

1.050

1.075

1.100

0.950

0.975

1.000

1.025

1.050

1.075

1.100AUD/USD AUD/USD

NZD/USD (Model estimate:0.837) NZD/USD model contributions


Jul12


Feb Mar Apr

0.770.780.790.800.810.820.830.840.850.860.870.880.89

0.770.780.790.800.810.820.830.840.850.860.870.880.89

NZD/USD NZD/USD

EUR/PLN (Model estimate:4.163) EUR/PLN model contributions


Feb11

Apr Jun Aug Oct Dec12

Feb Apr Jun Aug Oct Dec13

Feb Apr

3.7

3.8

3.9

4.0

4.1

4.2

4.3

4.4

4.5

4.6

4.7

3.7

3.8

3.9

4.0

4.1

4.2

4.3

4.4

4.5

4.6

4.7EUR/PLN EUR/PLN

Note: Linear regression models using a 200-day rolling estimation window. 2Y swap spread is included only when spot beta is positive. Short term financial models are

partial models, implying that there is no built-in consistency between, e.g. EUR/NOK, EUR/SEK and NOK/SEK models


-2.0%

-1.0%

0.0%

1.0%

W-15 W-16 W-17 W-18

2Y swap spread 10Y swap spread Vix Oil

-1.0%

0.0%

1.0%

W-15 W-16 W-17 W-18


-1.0%

0.0%

1.0%

2.0%

W-15 W-16 W-17 W-18


-2.0%

-1.0%

0.0%

1.0%

W-15 W-16 W-17 W-18



FX

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FX Market Update

Correlation monitor

Correlation monitor – current levels (52-week window) and 10-week changes (arrows)

Highest correlation with MSCI wld. Highest correlation with 2Y swap spr. Highest correlation with crude oil

EUR/USD correlations USD/JPY correlations EUR/GBP correlations

Notes: Correlations and betas are calculated using a rolling window of 52 weeks. Arrows denote the change in correlation over the past 10 weeks. Significant betas (at

95% confidence level) are denoted by an asterisk


Correlation monitor - current levels (52-week window) and 10-week changes (arrows)

USD

JPY 79% ↓

GBP 67% ↓ 64% ↑

CHF 27% ↓ 25% ↓ 40% ↓

AUD 60% ↓ 54% ↑ 59% ↓ 22% ↑

NZD 44% ↓ 33% ↓ 48% ↑ 15% ↑ 83% ↓

CAD 76% ↓ 59% ↑ 77% ↑ 27% ↓ 73% ↓ 66% ↓

SEK 32% ↑ 17% ↑ 20% ↓ 20% ↓ 51% ↑ 45% ↑ 42% ↑

NOK 38% ↓ 20% ↓ 40% ↓ 26% ↓ 36% ↓ 31% ↓ 47% ↓ 70% ↑

PLN -45% ↓ -43% ↓ -19% ↓ 3% ↑ -2% ↓ 4% ↓ -16% ↓ 10% ↑ 3% ↓

CZK -36% ↓ -27% ↓ -4% ↓ -15% ↓ -17% ↓ -25% ↓ -14% ↓ -16% ↑ -8% ↑ 47% ↓

HUF -25% ↓ -36% ↓ -10% ↓ 6% ↑ 11% ↓ 24% ↓ 5% ↓ 19% ↑ 15% ↑ 57% ↑ 25% ↓

RUB 22% ↓ 22% ↑ 40% ↓ -4% ↓ 54% ↓ 42% ↑ 47% ↓ 37% ↑ 30% ↓ 32% ↓ 31% ↓ 26% ↓

TRY 74% ↑ 53% ↓ 55% ↓ 14% ↓ 68% ↓ 65% ↓ 74% ↓ 57% ↑ 51% ↓ -8% ↓ -34% ↓ 17% ↓ 42% ↓

ZAR 45% ↓ 38% ↑ 49% ↓ 24% ↓ 68% ↓ 61% ↑ 54% ↓ 54% ↑ 41% ↓ 2% ↓ 0% ↓ 15% ↓ 44% ↓ 59% ↓

BRL 57% ↓ 29% ↓ 46% ↓ 12% ↓ 55% ↓ 50% ↓ 61% ↓ 56% ↑ 52% ↑ -8% ↑ 3% ↑ 5% ↑ 43% ↓ 57% ↓ 71% ↑

Notes: Correlations based on weekly changes using 52-week rolling window using EUR as numeraire. Arrows denote 10-week change in correlation. Source: Bloomberg.

CZKPLNNOK ZARTRYRUBHUFUSD JPY SEKCADNZDAUDCHFGBP

# FX Corr. (10w chg.) Beta1 USDRUB -73% -0.65*2 JPYRUB -73% -0.84*3 USDCAD -69% -0.3*4 USDSEK -64% -0.47*5 JPYPLN -61% -0.83*6 JPYCZK -60% -0.73*7 USDPLN -60% -0.6*8 NZDUSD 59% 0.42*9 CHFPLN -59% -0.35*

10 AUDJPY 59% 0.52*

# FX Corr. (10w chg.) Beta1 EURCZK 37% 0.13*2 CHFSEK 35% 0.17*3 EURSEK 35% 0.07*4 EURNOK 33% 0.05*5 GBPZAR -32% -0.16*6 NZDUSD 29% 0.1*7 SEKCZK 28% 0.17*8 USDCAD 28% 0.08*9 SEKZAR -28% -0.15*

10 NZDNOK 27% 0.12*

# FX Corr. (10w chg.) Beta1 USDRUB -63% -0.33*2 EURRUB -61% -0.26*3 CHFRUB -60% -0.28*4 GBPRUB -55% -0.23*5 NOKRUB -53% -0.23*6 AUDRUB -51% -0.2*7 USDCAD -51% -0.13*8 NZDRUB -50% -0.23*9 CADRUB -50% -0.21*

10 EURCZK -49% -0.14*

# Asset Corr. (10w chg.) Beta1 EURGBP 67% 0.76*2 Aluminium 54% 0.24*3 Copper 53% 0.27*4 Zinc 51% 0.21*5 Global equit. 49% 0.32*6 NZDUSD 48% 0.44*7 Itraxx -48% -0.09*8 EURPLN -45% -0.53*9 USDTRY -43% -0.61*

10 USDCAD -43% -0.64*

# Asset Corr. (10w chg.) Beta1 US10YGOV 55% 0.06*2 US10YSWP 55% 0.07*3 Jap. equit. 52% 0.25*4 2Y10Y spr. 46% 0.08*5 10Y swp. spr. 46% 0.08*6 Gold -44% -0.24*7 G10 Carry 44% 0.61*8 VIX -41% 0*9 Itraxx -37% -0.07*

10 Rel. equit. -37% -0.21*

# Asset Corr. (10w chg.) Beta1 EURUSD 67% 0.59*2 USDJPY 34% 0.3*3 Aluminium 30% 0.12*4 Itraxx -30% -0.05*5 US10YGOV 28% 0.03*6 US10YSWP 25% 0.037 US2YGOV 24% 0.128 IT10YGOV -23% -0.019 2Y10Y spr. 22% 0.1

10 USDTRY -21% -0.26


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EUR/CHF correlations EUR/SEK correlations EUR/NOK correlations

USD/SEK correlations USD/NOK correlations NOK/SEK correlations

AUD/USD correlations NZD/USD correlations USD/CAD correlations

EUR/CZK correlations EUR/RUB correlations EUR/PLN correlations

EUR/HUF correlations USD/TRY correlations USD/ZAR correlations

Notes: Correlations and betas are calculated using a rolling window of 52 weeks. Arrows denote the change in correlation over the past 10 weeks. Significant betas (at

95% confidence level) are denoted by an asterisk. Source: Bloomberg, Danske Bank Markets calculations

# Asset Corr. (10w chg.) Beta1 G10 Carry -38% -0.47*2 EURUSD 32% 0.3*3 VIX 30% 0*4 FX volatility 30% 0.06*5 Aluminium 30% 0.12*6 US equit. -29% -0.18*7 USDTRY 29% 0.38*8 Global equit. -26% -0.159 AUDUSD -23% -0.23

10 Ger. equit. -23% -0.11

# Asset Corr. (10w chg.) Beta1 EURNOK 58% 0.75*2 2Y swp. spr. 35% 0.07*3 US2YSWP 25% 0.054 US2YGOV 24% 0.055 10Y swp. spr. 24% 0.046 NZDUSD -24% -0.087 IT10YGOV -23% -0.018 EURGBP 19% 0.099 Crude oil -19% -0.03

10 G10 Carry -18% -0.1

# Asset Corr. (10w chg.) Beta1 EURSEK 58% 0.45*2 2Y swp. spr. 33% 0.05*3 US2YGOV 32% 0.05*4 US2YSWP 28% 0.04*5 10Y swp. spr. 26% 0.036 VIX -25% 07 US10YGOV 23% 0.018 US10YSWP 23% 0.019 IT10YGOV -22% 0

10 US equit. 22% 0.05

# Asset Corr. (10w chg.) Beta1 Global equit. -64% -0.47*2 USDTRY 63% 1*3 EURUSD -62% -0.7*4 G10 Carry -56% -0.85*5 US equit. -55% -0.43*6 NZDUSD -55% -0.56*7 Itraxx 54% 0.11*8 AUDUSD -54% -0.66*9 EURCHF 54% 0.65*

10 Ger. equit. -53% -0.31*

# Asset Corr. (10w chg.) Beta1 EURUSD -76% -0.74*2 Global equit. -57% -0.36*3 Itraxx 56% 0.1*4 USDTRY 55% 0.76*5 G10 Carry -51% -0.68*6 Copper -50% -0.25*7 USDCAD 50% 0.72*8 Ger. equit. -50% -0.26*9 US equit. -48% -0.32*

10 EURPLN 47% 0.55*

# Asset Corr. (10w chg.) Beta1 EURCHF 67% 0.47*2 Jap. equit. -33% -0.1*3 AUDUSD -31% -0.22*4 USDTRY 25% 0.235 NZDUSD -24% -0.146 Global equit. -24% -0.17 US equit. -22% -0.18 IT10YGOV -20% -0.019 Rel. equit. 19% 0.09

10 G10 Carry -18% -0.16

# Asset Corr. (10w chg.) Beta1 NZDUSD 83% 0.69*2 G10 Carry 75% 0.93*3 USDCAD -61% -0.82*4 Global equit. 58% 0.34*5 USDTRY -54% -0.7*6 US equit. 51% 0.32*7 Copper 46% 0.21*8 EURPLN -46% -0.5*9 Ger. equit. 45% 0.22*

10 Itraxx -42% -0.07*

# Asset Corr. (10w chg.) Beta1 AUDUSD 83% 0.99*2 G10 Carry 78% 1.16*3 USDCAD -65% -1.06*4 USDTRY -63% -0.97*5 Global equit. 59% 0.42*6 Rel. equit. -56% -0.34*7 US equit. 55% 0.41*8 Copper 53% 0.3*9 EURUSD 48% 0.53*

10 FX volatility -46% -0.12*

# Asset Corr. (10w chg.) Beta1 Global equit. -69% -0.3*2 Copper -67% -0.23*3 US equit. -66% -0.31*4 NZDUSD -65% -0.4*5 AUDUSD -61% -0.45*6 VIX 59% 0*7 G10 Carry -58% -0.54*8 Ger. equit. -56% -0.2*9 FX volatility 52% 0.08*

10 USDTRY 52% 0.49*

# Asset Corr. (10w chg.) Beta1 Crude oil -49% -0.14*2 EURPLN 47% 0.4*3 Global equit. -45% -0.21*4 US10YGOV -44% -0.04*5 US equit. -44% -0.21*6 Ger. equit. -44% -0.16*7 Copper -43% -0.16*8 Itraxx 42% 0.06*9 US10YSWP -41% -0.04*

10 Aluminium -38% -0.12*

# Asset Corr. (10w chg.) Beta1 Crude oil -61% -0.26*2 US equit. -44% -0.33*3 Ger. equit. -43% -0.25*4 G10 Carry -42% -0.64*5 Global equit. -42% -0.3*6 EURGBP 40% 0.5*7 AUDUSD -39% -0.48*8 VIX 39% 0*9 FX volatility 38% 0.1*

10 EURCHF 37% 0.44*

# Asset Corr. (10w chg.) Beta1 Global equit. -54% -0.3*2 USDTRY 52% 0.62*3 Itraxx 52% 0.08*4 GR10YGOV 49% 0*5 US equit. -49% -0.28*6 G10 Carry -48% -0.55*7 AUDUSD -46% -0.42*8 FX volatility 45% 0.09*9 EURUSD -45% -0.38*

10 NZDUSD -44% -0.34*

# Asset Corr. (10w chg.) Beta1 USDTRY 59% 0.87*2 EURPLN 57% 0.71*3 G10 Carry -56% -0.79*4 NZDUSD -46% -0.43*5 USDCAD 44% 0.67*6 Global equit. -40% -0.27*7 FX volatility 40% 0.1*8 AUDUSD -39% -0.45*9 US equit. -39% -0.28*

10 VIX 38% 0*

# Asset Corr. (10w chg.) Beta1 NZDUSD -63% -0.4*2 G10 Carry -63% -0.6*3 GR10YGOV 60% 0*4 FX volatility 54% 0.09*5 AUDUSD -54% -0.41*6 EURPLN 52% 0.44*7 USDCAD 52% 0.54*8 Global equit. -47% -0.22*9 Itraxx 45% 0.06*

10 EURUSD -43% -0.31*

# Asset Corr. (10w chg.) Beta1 AUDUSD -61% -0.93*2 NZDUSD -54% -0.69*3 G10 Carry -54% -1.02*4 USDTRY 48% 0.95*5 GR10YGOV 45% 0.01*6 USDCAD 41% 0.85*7 Global equit. -36% -0.33*8 EURCHF 36% 0.55*9 Itraxx 35% 0.09*

10 Copper -34% -0.24*


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FX Market Update

Carry monitor

Carry overview (against EUR)

Top 10 carry currency pairs (1M) Top 10 carry currency pairs (3M)

G10 carry index (total return) G10 carry index (average deviation from PPP)


1W 1M 3M 1Y 1W 1M 3M 1Y

EUR USD 0.2% 0.2% 0.3% 0.3% USD 0.0 0.0 0.0 0.0

JPY 0.0% 0.0% 0.0% 0.0% JPY 0.0 0.0 0.0 0.0

GBP 0.5% 0.5% 0.5% 0.5% GBP 0.1 0.1 0.1 0.1

CHF -0.1% -0.1% -0.1% -0.2% CHF 0.0 0.0 0.0 0.0

SEK 1.0% 1.1% 1.1% 1.0% SEK 0.1 0.2 0.2 0.2

NOK 1.6% 1.6% 1.7% 1.6% NOK 0.2 0.2 0.3 0.2

AUD 3.0% 3.0% 3.1% 2.9% AUD 0.3 0.4 0.4 0.3

NZD 2.7% 2.9% 2.8% 2.9% NZD 0.3 0.3 0.3 0.3

CAD 1.0% 1.1% 1.1% 1.1% CAD 0.1 0.2 0.1 0.1

DKK -0.2% -0.2% -0.2% -0.2% DKK n/a n/a n/a n/a

PLN 3.0% 3.0% 2.7% 2.3% PLN 0.4 0.5 0.4 0.3

TRY 4.0% 4.1% 4.0% 4.5% TRY 0.6 0.6 0.6 0.6

MXN 3.2% 3.5% 3.4% 3.5% MXN 0.3 0.4 0.4 0.3

ZAR 5.2% 5.3% 5.3% 5.2% ZAR 0.0 0.0 0.0 0.0

Carry in forward market (annualized) Carry-to-risk (carry / ATM volatility)

Currency pair Carry-to-risk Carry

1 TRY/USD 0.74 3.9%

2 TRY/EUR 0.65 4.1%

3 PLN/EUR 0.46 3.0%

4 AUD/USD 0.41 2.9%

5 AUD/CHF 0.41 3.1%

6 AUD/EUR 0.38 3.0%

7 AUD/CAD 0.37 2.0%

8 AUD/GBP 0.37 2.6%

9 NZD/CHF 0.33 3.0%

10 NZD/EUR 0.31 2.8%

Currency pair Carry-to-risk Carry

1 TRY/USD 0.61 3.7%

2 TRY/EUR 0.61 4.0%

3 AUD/CHF 0.40 3.2%

4 PLN/EUR 0.40 2.7%

5 AUD/EUR 0.37 3.0%

6 AUD/USD 0.36 2.7%

7 AUD/GBP 0.33 2.5%

8 AUD/CAD 0.32 1.9%

9 NZD/CHF 0.32 3.0%

10 NZD/EUR 0.30 2.8%

200

220

240

260

280

300

320

340

360

G10 Carry index Interest rate gain

-20%

-10%

0%

10%

20%

30%

40%

Avg PPP missalignment


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Volatility overview

Current implied volatilities, one-week changes and actual volatilities

Note: The table shows current levels of ATM implied volatilities, historical volatilities and the Z-score on the spread calculated using one year of observations. The last

column shows the slope of the implied volatility term structure and a Z-score calculated using one year of observations. The chart shows current levels of 1M, 3M and

1Y ATM implied volatilities, the level one week ago, the average level of the past year and the 1Y interval.


Act. / Spr. Z-scr. Act. / Spr. Z-scr. Act. / Spr. Z-scr.

EUR/USD 9.4% 7.5% 0.9 8.0% 7.9% -0.4 8.1% 8.9% -1.2 9.0% 8.5% -0.2 1.1 -0.5

EUR/JPY 14.7% 13.3% 0.6 14.0% 16.7% -1.5 13.8% 17.0% -2.4 13.4% 13.3% -1.2 -0.6 -0.9

USD/JPY 12.6% 10.9% 0.4 11.8% 14.1% -3.2 11.4% 12.8% -2.7 11.0% 9.1% -0.2 -0.7 -1.3

GBP/USD 6.9% 8.2% -1.4 6.6% 7.1% -0.9 6.8% 8.0% -2.0 7.5% 6.8% -0.3 1.0 -0.8

EUR/GBP 7.5% 8.3% -0.4 6.8% 7.2% -0.2 6.9% 9.2% -2.1 7.3% 7.4% -1.2 0.5 -0.8

EUR/CHF 4.7% 5.0% -0.2 4.2% 3.7% 0.4 4.4% 5.4% -0.9 4.9% 4.2% 0.4 0.7 -1.0

EUR/SEK 7.6% 6.9% 1.0 6.8% 7.7% -0.6 6.7% 7.2% -0.3 6.6% 7.3% -1.4 -0.2 -1.7

EUR/NOK 7.5% 5.4% 1.6 6.6% 5.9% 1.1 6.4% 6.5% 0.4 6.3% 6.6% -0.2 -0.3 -2.4

EUR/AUD 8.8% 7.3% 1.1 8.0% 8.6% -0.6 8.2% 9.4% -1.6 8.7% 8.2% -0.7 0.7 -1.0

EUR/NZD 10.5% 9.9% 0.7 9.2% 10.1% -0.6 9.4% 10.9% -1.7 9.8% 9.4% 0.1 0.6 -0.9

EUR/CAD 8.4% 7.6% 0.8 7.4% 8.1% -0.7 7.6% 9.0% -1.9 8.3% 7.9% -0.4 0.9 -0.5

EUR/PLN 6.9% 6.1% 0.8 6.5% 5.9% 0.8 6.8% 6.4% 0.3 7.5% 8.4% -1.0 1.0 -0.8

EUR/CZK 5.5% 5.6% 0.5 5.0% 5.6% 0.3 5.2% 5.6% 0.4 5.6% 7.4% -1.0 0.5 -0.6

EUR/TRY 7.2% 6.7% 0.4 6.4% 6.7% -0.6 6.6% 7.2% -1.4 7.7% 7.3% 0.4 1.3 -1.1

EUR/RUB 9.0% 7.9% 0.0 8.3% 8.3% -1.1 8.4% 6.9% -0.1 8.9% 7.7% -0.7 0.7 -1.6

USD/CHF 9.2% 7.3% 0.9 7.8% 7.7% -0.4 7.9% 7.9% -0.7 8.8% 8.2% 1.0 1.0 -0.8

USD/SEK 10.7% 10.1% 0.8 9.5% 11.3% -1.5 9.7% 10.7% -0.9 10.7% 10.5% 0.8 1.3 -0.7

USD/NOK 9.9% 9.1% 0.9 8.6% 9.6% -0.7 8.9% 9.7% -0.9 10.1% 9.8% 0.7 1.4 -0.9

AUD/USD 7.6% 7.1% 0.2 7.0% 8.1% -1.3 7.5% 7.6% -0.7 8.7% 8.4% 0.9 1.7 -0.9

NZD/USD 9.6% 9.7% 0.0 9.0% 9.6% -0.5 9.4% 9.8% -0.7 10.5% 9.8% 1.2 1.5 -0.8

USD/CAD 5.7% 5.1% 0.6 5.6% 5.7% -0.5 5.8% 5.8% -0.5 6.8% 6.4% 0.8 1.2 -0.8

NOK/SEK 6.8% 6.6% 1.2 6.3% 7.6% -0.4 6.2% 7.2% -0.2 6.2% 7.0% -0.2 -0.2 -1.9

USD/ZAR 13.0% 13.3% -0.3 12.1% 12.6% -0.5 12.7% 12.4% -0.3 15.0% 14.1% 0.7 2.8 0.3

EUR/HUF 9.3% 9.8% -0.1 9.1% 10.7% -1.2 9.2% 9.7% 0.0 9.6% 10.5% 0.6 0.6 -0.5

USD/TRY 5.3% 4.6% 0.0 5.4% 4.9% -0.4 6.1% 5.3% -0.6 7.6% 6.7% 0.5 2.2 -0.7

USD/RUB 9.5% 7.7% 0.3 8.9% 8.9% -0.9 9.2% 7.0% 0.3 9.6% 9.4% -0.9 0.6 -1.2

1W imp./chg. 1M imp./chg. 3M imp./chg. 1Y imp./chg.Act. / Spr. Z-scr. 1M-1Y slope/Z-scr.

8.9%

5.4%

9.1%

12.1%

6.3%

5.6%

9.0%

7.0%

8.6%

9.5%

7.8%

8.3%

6.4%

5.0%

6.5%

7.4%

9.2%

8.0%

6.6%

6.8%

4.2%

6.8%

6.6%

11.8%

14.0%

8.0%

0% 5% 10% 15% 20% 25%

USD/RUB

USD/TRY

EUR/HUF

USD/ZAR

NOK/SEK

USD/CAD

NZD/USD

AUD/USD

USD/NOK

USD/SEK

USD/CHF

EUR/RUB

EUR/TRY

EUR/CZK

EUR/PLN

EUR/CAD

EUR/NZD

EUR/AUD

EUR/NOK

EUR/SEK

EUR/CHF

EUR/GBP

GBP/USD

USD/JPY

EUR/JPY

EUR/USD

1M volatilities (pct.'ile)

9.2%

6.1%

9.2%

12.7%

6.2%

5.8%

9.4%

7.5%

8.9%

9.7%

7.9%

8.4%

6.6%

5.2%

6.8%

7.6%

9.4%

8.2%

6.4%

6.7%

4.4%

6.9%

6.8%

11.4%

13.8%

8.1%

0% 5% 10% 15% 20% 25%

3M volatilities

1Y interval Now Average 1W ago

9.6%

7.6%

9.6%

15.0%

6.2%

6.8%

10.5%

8.7%

10.1%

10.7%

8.8%

8.9%

7.7%

5.6%

7.5%

8.3%

9.8%

8.7%

6.3%

6.6%

4.9%

7.3%

7.5%

11.0%

13.4%

9.0%

0% 5% 10% 15% 20% 25%

1Y volatilities


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G10 and EM implied volatility cones

Note: The volatility cones show ATM implied volatilities for G10 and EM currency pairs

Source: Bloomberg, Danske Bank Markets

5.0%

7.5%

10.0%

12.5%

15.0%

17.5%

1W 1M 3M 6M 12M

EUR/USD

1Y interval Now Average Last week

5.0%

7.5%

10.0%

12.5%

15.0%

17.5%

1W 1M 3M 6M 12M

USD/JPY


7.5%

10.0%

12.5%

15.0%

17.5%

20.0%

1W 1M 3M 6M 12M

EUR/JPY


2.5%

5.0%

7.5%

10.0%

12.5%

1W 1M 3M 6M 12M

EUR/GBP


2.5%

5.0%

7.5%

10.0%

12.5%

1W 1M 3M 6M 12M

GBP/USD


0.0%

5.0%

10.0%

1W 1M 3M 6M 12M

EUR/CHF


5.0%

7.5%

10.0%

1W 1M 3M 6M 12M

EUR/SEK


2.5%

5.0%

7.5%

10.0%

1W 1M 3M 6M 12M

EUR/NOK


2.5%

5.0%

7.5%

10.0%

12.5%

15.0%

17.5%

1W 1M 3M 6M 12M

AUD/USD


5.0%

7.5%

10.0%

12.5%

15.0%

17.5%

1W 1M 3M 6M 12M

NZD/USD


2.5%

5.0%

7.5%

10.0%

12.5%

1W 1M 3M 6M 12M

USD/CAD


5.0%

7.5%

10.0%

12.5%

15.0%

1W 1M 3M 6M 12M

EUR/PLN


2.5%

5.0%

7.5%

10.0%

12.5%

15.0%

17.5%

1W 1M 3M 6M 12M

EUR/RUB


2.5%

5.0%

7.5%

10.0%

12.5%

1W 1M 3M 6M 12M

EUR/CZK


7.5%

10.0%

12.5%

15.0%

17.5%

20.0%

22.5%

25.0%

1W 1M 3M 6M 12M

USD/ZAR


5.0%

10.0%

15.0%

20.0%

1W 1M 3M 6M 12M

EUR/HUF


2.5%

5.0%

7.5%

10.0%

12.5%

15.0%

1W 1M 3M 6M 12M

USD/TRY


5.0%

10.0%

15.0%

20.0%

1W 1M 3M 6M 12M

USD/RUB



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G10 and EM implied volatility surfaces

Note: The chart shows the implied volatility surface for G10 and EM currency pairs. Data is based on mid-prices and is indicative only. The data is shown for maturities of

one and six months for various moneyness. Put deltas are denoted ‘xP’, while call deltas are denoted ‘xC’

Source: Danske Bank Markets

5%

10%

15%

5P 20P 35P ATM 35C 20C 5C

EUR/USD

1M

6M

10.0%

12.5%

15.0%

5P 20P 35P ATM 35C 20C 5C

USD/JPY

1M

6M

10%

15%

20%

5P 20P 35P ATM 35C 20C 5C

EUR/JPY

1M

6M

5%

10%

5P 20P 35P ATM 35C 20C 5C

EUR/GBP

1M

6M

5.0%

7.5%

10.0%

12.5%

5P 20P 35P ATM 35C 20C 5C

GBP/USD

1M

6M

0%

5%

10%

5P 20P 35P ATM 35C 20C 5C

EUR/CHF

1M

6M

5.0%

7.5%

10.0%

5P 20P 35P ATM 35C 20C 5C

EUR/SEK

1M

6M

5.0%

7.5%

10.0%

5P 20P 35P ATM 35C 20C 5C

EUR/NOK

1M

6M

5%

10%

15%

5P 20P 35P ATM 35C 20C 5C

AUD/USD

1M

6M

5%

10%

15%

20%

5P 20P 35P ATM 35C 20C 5C

NZD/USD

1M

6M

5%

10%

5P 20P 35P ATM 35C 20C 5C

USD/CAD

1M

6M

5%

10%

15%

5P 20P 35P ATM 35C 20C 5C

EUR/PLN

1M

6M

0%

5%

10%

15%

5P 20P 35P ATM 35C 20C 5C

EUR/CZK

1M

6M

5%

10%

15%

5P 20P 35P ATM 35C 20C 5C

EUR/RUB

1M

6M

10%

15%

20%

25%

5P 20P 35P ATM 35C 20C 5C

USD/ZAR

1M

6M

5%

10%

15%

20%

5P 20P 35P ATM 35C 20C 5C

EUR/HUF

1M

6M

5%

10%

15%

5P 20P 35P ATM 35C 20C 5C

USD/TRY

1M

6M

5%

10%

15%

20%

5P 20P 35P ATM 35C 20C 5C

USD/RUB

1M

6M


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FX Market Update

Range trading monitor

Ranking of range trade candidates

1W range trade no. 1 – EUR/USD 1W range trade no. 2 – EUR/TRY

1M range trade no. 1 – NOK/SEK 1M range trade no. 2 – AUD/NOK

3M range trade no. 1 – EUR/PLN 3M range trade no. 2 – CAD/CHF

Notes: Range trades are ranked by the realised range relative to the pay-off received by selling a straddle, with the strike set at-the-money (DNS convention).*A ratio

below 1 implies that the historically realised range is smaller than the break-even range.**ADX provides a measure of the strength of the trend in a given currency pair.

Generally, a value above 25 characterises a pair that is trending. The bands in the charts show break-even levels. Indicative prices and levels


1 EUR/USD 166 pips 152 pips 1.1 19.8 1 NOK/SEK 227 pips 163 pips 1.4 13.8 1 EUR/PLN 1210 pips 1150 pips 1.1 21.02 EUR/TRY 228 pips 199 pips 1.2 24.6 2 AUD/NOK 1927 pips 1196 pips 1.6 16.5 2 CAD/CHF 411 pips 281 pips 1.5 22.33 NOK/JPY 36 pips 31 pips 1.2 15.6 3 GBP/NZD 572 pips 355 pips 1.6 9.1 3 EUR/RUB 20294 pips 13770 pips 1.5 23.7

ADX**# FX Actual range

Delta-neutral straddle

Ratio* # FX Actual range


Ratio*

3 month strategiesActual range


Ratio* ADX**FX#

1 week strategies

ADX**

1 month strategies

1.27

1.28

1.29

1.30

1.31

1.32

1.33

26/03 31/03 05/04 10/04 15/04 20/04 25/04 30/04 05/05

2.28

2.30

2.32

2.34

2.36

2.38

26/03 31/03 05/04 10/04 15/04 20/04 25/04 30/04 05/05

1.10

1.12

1.14

1.16

1.18

08/01 08/02 08/03 08/04 08/055.60

5.70

5.80

5.90

6.00

6.10

6.20

08/01 08/02 08/03 08/04 08/05

4.00

4.05

4.10

4.15

4.20

4.25

4.30

21/08 21/11 21/02 21/050.88

0.90

0.92

0.94

0.96

0.98

1.00

21/08 21/10 21/12 21/02 21/04 21/06


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FX Market Update

Option market positioning and skew valuation

1M 25-delta risk reversals (z-scores, vol adjusted) 1M 25-delta risk reversals (z-scores, vol adjusted)

Risk reversals explained by currency spot betas to equities Valuation signals from simple comparison with equity betas

EUR/USD 1M 25-delta risk reversal USD/JPY 1M 25-delta risk reversal

Note: Z-scores are computed using maximum available data and on risk reversals divided by ATM volatility. Spot beta to equities ( ‘risk beta’) is the beta coefficient from a

linear regression of weekly spot returns on weekly returns on the S&P500 equity index using a 1Y estimation window. Red broken lines in 1M RR charts indicate the +/-

2 std dev band (computed on a volatility adjusted basis)

Source: Bloomberg (synthetic risk reversal quotes are used for non-standard currency pairs), Danske Bank Markets calculations

1W chg

0.64

-0.12

-0.01

0.08

-0.10

0.18

0.02

0.25

-0.24

-0.06

-0.13

Cheap Rich

-2 -1 0 1 2

USD/JPY

EUR/CHF

USD/CAD

NZD/USD

AUD/USD

EUR/USD

EUR/GBP

EUR/PLN

EUR/SEK

EUR/NOK

EUR/TRY# Currency Z-score RR 1W chg # Currency Z-score RR 1W chg

1 CHF/TRY -1.7 0.3 1 TRY/JPY 1.9 -0.6

2 EUR/NZD -1.7 0.1 2 AUD/JPY 1.8 -0.6

3 AUD/CAD -1.5 -1.1 3 CAD/CHF 1.8 0.2

4 GBP/NZD -1.5 0.1 4 PLN/JPY 1.7 -1.0

5 EUR/TRY -1.2 0.2 5 EUR/JPY 1.5 -0.6

6 NZD/CAD -1.2 -1.1 6 GBP/JPY 1.5 -0.4

7 EUR/AUD -1.0 0.2 7 USD/CHF 1.5 0.8

8 EUR/NOK -1.0 -0.2 8 NZD/JPY 1.4 -0.7

9 EUR/SEK -0.9 0.2 9 CAD/JPY 1.3 -0.4

10 EUR/PLN -0.7 0.8 10 NOK/JPY 1.3 -0.5

Cheap Rich

EURGBP

EURAUDEURNZD

EURUSD

EURJPYEURCAD

EURCHF

EURNOK

EURSEK

EURPLN

EURTRYGBPAUD

GBPNZD

GBPUSD

GBPJPYGBPCADGBPCHF

GBPNOKGBPSEK

GBPTRY

AUDNZD

AUDUSD

AUDJPY

AUDCAD

AUDCHFAUDNOK

AUDSEK

NZDUSD

NZDJPY

NZDCAD

NZDCHF

USDJPY

USDCAD

USDCHFUSDNOKUSDSEK

USDPLN

USDTRY

CADJPYCHFJPY NOKJPYSEKJPY

PLNJPYTRYJPY

CADCHF

NOKCAD

NOKCHF

CHFSEK

PLNCHF

CHFTRYNOKSEK

TRYNOK

SEKPLN

TRYSEK

R² = 0.3366

-0.25

-0.20

-0.15

-0.10

-0.05

0.00

0.05

0.10

0.15

0.20

0.25

-1.0 -0.5 0.0 0.5 1.0

1M 25-delta RR (vol adj)

Spot beta to equities

RR rich

RR cheap

# Currency Risk beta RR (adj) RR # Currency Residual RR (adj) RR

1 TRYSEK -0.2 -0.1 cheap 1 AUDCAD -0.2 -0.2 cheap

2 USDJPY 0.2 0.0 rich 2 USDTRY 0.2 0.2 rich

3 TRYNOK -0.1 -0.1 cheap 3 NZDCAD -0.1 -0.2 cheap

4 CADCHF 0.1 0.0 rich 4 TRYNOK -0.1 -0.1 cheap

5 GBPCAD -0.1 0.0 cheap 5 GBPTRY 0.1 0.1 rich

6 EURNOK -0.1 0.0 cheap 6 TRYSEK -0.1 -0.1 cheap

7 AUDSEK -0.1 0.0 cheap 7 AUDUSD -0.1 -0.1 cheap

8 EURCAD -0.1 0.0 cheap 8 EURPLN 0.1 0.1 rich

9 AUDNZD -0.1 0.0 cheap 9 USDCAD 0.1 0.1 rich

10 EURTRY 0.0 0.0 rich 10 SEKPLN 0.1 0.1 rich

'RR sign' = 'Risk beta sign' Residuals (simple model)

-3

-2

-1

0

1

2

Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13

+/- 2 std dev

Calls more expensive than puts

Puts more expensive than calls

+/- 2 std dev

-5

-4

-3

-2

-1

0

1

2




+/- 2 std dev


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FX Market Update

EUR/GBP 1M 25-delta risk reversal EUR/CHF 1M 25-delta risk reversal

EUR/SEK 1M 25-delta risk reversal EUR/NOK 1M 25-delta risk reversal

USD/CAD 1M 25-delta risk reversal AUD/USD 1M 25-delta risk reversal

NZD/USD 1M 25-delta risk reversal EM 1M 25-delta risk reversal

Source: Bloomberg (synthetic risk reversal quotes are used for non-standard currency pairs), Danske Bank Markets calculations

-1.0

-0.5

0.0

0.5

1.0

1.5




+/- 2 std dev

-3

-2

-2

-1

-1

0

1

1

2

2

3

3




+/- 2 std dev

-1

0

1

2




+/- 2 std dev

-1

0

1

2




+/- 2 std dev

-1

0

1

2




+/- 2 std dev

-2

-1

0

1




+/- 2 std dev

-3

-2

-1

0

1




+/- 2 std dev

-1

0

1

2




EUR/TRY

EUR/PLN


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FX Market Update

Central bank overview

Main G10 central banks outlook

ECB market pricing Fed market pricing

BoE market pricing Riksbank market pricing

Note: The charts show the cumulated market pricing of rate changes on meeting dates


Official policy rate Current Next decision Official policy rate Current Next decision

EUR Minimum bid rate 0.75% 02 May 13 0.50 0.50 0.50 SEK Repo rate 1.00% 03 Jul 13 1.00 1.00 1.25

USD Federal funds rate 0.25% 01 May 13 0.25 0.25 0.25 NOK Sight deposit rate 1.50% 08 May 13 1.50 1.50 1.75

JPY Overnight call rate 0.10% 22 May 13 0.10 0.10 0.10 CAD Overnight rate 1.00% 29 May 13 1.00 1.00 1.00

GBP Base rate 0.50% 09 May 13 0.50 0.50 0.50 AUD Cash rate 3.00% 07 May 13 3.00 2.75 2.50

CHF 3-month Libor 0.00% 20 Jun 13 0.00 0.00 0.00 NZD Cash rate 2.50% 12 Jun 13 2.50 2.50 2.50

DB forecasts (3M-6M-12M)DB forecasts (3M-6M-12M)

0.080% -1 -1 -2 -2 -2 -2

0.75%

-0.10%

0.10%

0.30%

0.50%

0.70%

0.90%

May 13 Jun 13 Jul 13 Aug 13 Sep 13 Oct 13 Nov 13

EONIA fixing

ECB dates EONIA Refi rate

0.139%-1 -3 -2 -2 -1 -1

0.25%

0.00%

0.05%

0.10%

0.15%

0.20%

0.25%

0.30%

Mar 2013

May 2013

Jul 2013 Sep 2013

Nov 2013

Jan 2014

Fed dates USD OIS Fed funds target

0.433%-1-3

-4-6

-8-9 -10 -11 -12 -12 -13 -13 -13 -14 -14 -13 -13

0.50%

0.20%

0.25%

0.30%

0.35%

0.40%

0.45%

0.50%

0.55%

Apr 2013

Jul 2013 Oct 2013

Jan 2014

Apr 2014

Jul 2014

BoE dates SONIA Base rate

1.06%

-10

-16-17 -17 -17-16

-12

-7-4

-1

1.00%

0.80%

0.85%

0.90%

0.95%

1.00%

1.05%

1.10%

1.15%

1.20%

Apr 2013

Jul 2013

Oct 2013

Jan 2014

Apr 2014

Jul 2014

Oct 2014

Jan 2015

Riksbank dates STINA Repo rate


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FX Market Update

FX trade overview

FX trade recommendations


FX Top Trades 2013


Type Trade Idea Target & P/L* Opened 05/12/2012 Start 1.31 Target/Stop Now 1.32 P/L 0.50% Opened 05/12/2012 Start 6.36

Target/Stop 3.2% / 2.5% Now 6.20

P/L 2.44% Opened 05/12/2012 Start 100.0

Target/Stop 110 / 95 Now 100.369

P/L 1.97%

Spot Long TRY, MXN, HUF vs. Short USD

Buy equally weighted carry basket (Long TRY, MXN, HUF vs. Short USD) spot at index 100 for a 110 target; stop at 95.This basket yields an indicative carry of close to 4%

Forward Sell USD/CNH 12 Forward

Sell 12M USD/CNH @ 6.3550. We set a 3.2% profit target and will close the trade if we incur a 2.5% mark-to-market loss on the trade. Spot-ref: 6.2120

Open FX Top Trades

Option EUR/USD butterfly

Enter 6M EUR/USD 1.30-1.36-1.42 butterfly at an indicative cost of USD 176 pips

# Type Trade Opened Level Closed Level P/L 1 Option Bearish 6M JPY/SEK risk reversal 05/12/12 8.02 11/01/13 7.320 6.44% 2 Spot Sell GBP/NOK 05/12/12 9.04 16/01/13 8.962 1.00% 3 Spot Buy EUR/CHF 05/12/12 1.2145 18/01/13 1.250 2.89% 4 Spot Sell USD/CAD 05/12/12 0.9914 19/01/13 1.015 -2.16% 5 Spot Sell USD/SGD 05/12/12 1.2183 11/03/13 1.250 -2.70% 6 Option USD/JPY option strategy 05/12/12 82.20 22/03/13 94.850 11.45% 7 Spot Buy RUB/CZK 05/12/12 0.6246 16/04/13 0.6305 3.33%

Closed FX Top Trades

# Cum Return Avg Return Avg Days Open Profitable 7 29.0% 4.1% 93 days

Loss-making 3 -4.9% -1.6% 95 days

All trades 10 24.1% 2.4% 93 days

FX Top Trades 2013

Type Trade Idea Target & P/L* Opened 22/03/2013 Start 1.557

Target/Stop n/a Now 1.570

P/L -0.75% Opened 22/03/2013 Start 94.850

Target/Stop n/a Now 97.460

P/L 1.51% Opened 22/04/2013 Start 9.940

Target/Stop 9.50 / 10.25 Now 10.048

P/L -1.07%

Spot Sell GBP/SEK spot

To benefit from strong Swedish numbers, we would like to position for a move lower in GBP/SEK

Option Enter 3M GBP/CAD call spread

Carney will be looking to do whatever it takes to prop up the UK economy whereas strong US growth should support CAD. We recommend to express our bearish view on GBP/CAD via 3M GBP/CAD call spread (sell 1.5000 call and buy 1.5640 call)

Option Enter 6M USD/JPY risk reversal

We expect further JPY weakness to materialize and recommend entering a new 6M USD/JPY risk reversal at zero costs (sell 6M 91.90 putand buy 6M 98.00 call). The strategy utilizes the significant correction lower in the option skew into negative territory and extends maturity on our long

Open FX Trades

# Cum Return Avg Return Avg Days Open Profitable 7 14.2% 2.0% 136 days

Loss-making 3 -4.9% -1.6% 27 days

All trades 10 9.2% 0.9% 103 days

FX Trade Performance 2013

# Type Trade Opened Level Closed Level P/L 1 Option 6M USD/JPY Seagull 15/08/12 78.71 15/02/13 93.39 5.03% 2 Option 1M-3M EUR/SEK call calendar spread 02/10/12 8.51 02/01/13 8.55 0.93% 3 Spot Buy RUB, AUD, NOK versus USD 19/09/12 100 19/04/13 100.65 0.65% 4 Spot Buy EUR/CZK 05/11/12 25.267 19/04/13 25.860 2.34% 5 Spot Buy MXN/JPY spot 04/04/13 7.74 16/04/13 7.950 2.78% 6 Spot Sell CHF/NOK 22/03/13 6.17 23/04/13 6.290 -1.78% 7 Option Sell 3M EUR/CHF put spread 28/02/13 1.2200 24/04/13 1.2315 0.51%

Closed FX Trades


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FX Market Update

FX and Commodities Research

Arne Lohmann Rasmussen Head of FX Research NOK, SEK, DKK +45 45 12 85 32 [email protected]

Kasper Kirkegaard Senior Analyst G10 +45 45 13 70 18 [email protected]

Stefan Mellin Senior Analyst SEK +46 8 568 805 92 [email protected]

Morten Helt Senior Analyst G10 +45 45 12 85 18 [email protected]

Christin Kyrme Tuxen Senior Analyst Commodities +45 45 13 78 67 [email protected]


FX

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FX Market Update

Disclosure This research report has been prepared by Danske Research, a division of Danske Bank A/S (‘Danske Bank’). The author of the research report is Morten Helt, Senior

Analyst.

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Calculations and presentations in this research report are based on standard econometric tools and methodology as well as publicly available statistics for each individual

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Documents

FX Market Updatec3352932.r32.cf0.rackcdn.com/pdf97f0e5a7f4d51edb0b... · Looking at the signals from our short-term financial models, we currently observe the biggest misalignments