Post on 29-May-2018
8/9/2019 Lloyds TSB JUL 30 FX Strategy Weekly
1/13
FX Strategy WeeklyFriday, 30th July 2010
Kenneth BrouxSenior Market Economist0207 158 1750kenneth.broux@lloydsbanking.com
Market Strategy
Lloyds TSB Corporate Markets Economic Research, 10 Gresham Street, London, EC2V 7AE, Switchboard: 0207 626 1500.1
Market Outlook
Tactical view:= PMIs to test bullish GBP/USD trend, GBP/CAD target 1.65Dollar weakness coloured G10 fx markets in July but a stabilisation in speculative positioningbegs the question if the currency is due for some reprieve in August. The path to a USDbounce remains uneven at best, but as the tide of positive Q2 corporate earnings subsidesand scepticism surrounding EU peripheral spreads lingers, we wonder if safe havenflows could make a surprise return. Dovish statements by the BoE have so far beendisregarded by GBP bulls but as the policy stakes are gradually raised, we think there isa possibility that GBP exposure is gradually reduced from technically overbought levels.The week ahead is dominated by the PMIs and US non-farm payrolls. Holiday disruptedtrading conditions are likely to characterise daily flows. Demand for carry may keep theAUD underpinned even assuming for no change in RBA policy.
Recap A strong week for the pound capped the month of July, with GBP taking weak consumer
confidence and housing data in its stride. GBP rallied vs its G10 peers with the exceptionof the JPY and CHF, netting gains of 2% vs the NZ$, 1.9% vs the USD (topping 1.57), and0.6% vs the EUR. The NZ$ underperformed the G10 after the RBNZ raised interest ratesto 3% but warned of a slower pace of policy tightening in the months ahead. The rally inEUR/USD ran out of steam at 1.3107 and a negative report by Moodys on Spain causedprofit taking to set in, dragging the cross back below 1.30 into Fridays close.
US Q2 GDP was in line with forecast at 2.4% annualised. An upward revision for Q1 to3.7% vs 2.7% previously on the back of stronger inventories highlighted scepticismsurrounding the durability of the recovery. The core PCE index accelerated to 1.1% vs 0.7%.In the UK, data confirmed the recent slowdown in housing market activity with pricesdropping 0.5% m/m in July (Nationwide) and an easing in mortgage approvals to 47,600from 49,500. The CBI reported a surge in reported retail sales to +33 in July from -5 in June,marking the biggest gain in three years. The MPC testimony to the TSC brought no change inpolicy perceptions and means next week should see the BoE keep BR and the APF unchanged.
Gilt yields and swaps shot up to one-month highs over the first part of the week but dovishMPC commentary on growth and month-end extension buying drove yields back downwith the breach of key support levels triggering additional support. 10y yields hit a 3.52%high but ended the week at 3.33%, after piercing support levels and 3.45% and 3.40%.5y swaps initially firmed to 2.62% but three days of lower rates followed and led swapsto close at 2.41%. The 3mth Libor/Ois spread widened 2bp to 25bp, the highest since lastSeptember. The 2y/10y swap curve ended the week close to flat at 200bp after havingwidened at 204bp. The 10y swap spread rose 3bp to 5bp. A 6.0bln syndicated 2040 IL
auction was sold at a yield of 1.02%
Contents Page
Market Outlook ................................................................................................................ 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
CloseWeeklyChange
FX %GBP/EUR 1.2025 0.64%
GBP/USD 1.5714 1.87%
GBP/JPY 135.85 0.75%GBP/CHF 1.6353 0.51%
GBP/AUD 1.7351 0.74%
GBP/NZD 2.1635 2.02%GBP/CAD 1.6157 1.13%
GBP/NOK 9.5026 -0.24%
GBP/SEK 11.31 0.38%
EUR/USD 1.3067 1.22%USD/JPY 86.45 -1.15%AUD/USD 0.9057 1.12%NZD/USD 0.7264 -0.12%USD/CAD 1.0282 -0.73%USD/SEK 7.1991 -1.48%USD/NOK 6.0471 -2.09%
USD/CHF 1.0407 -1.29%
Swaps % bp
2yr 1.385 -6.0
5yr 2.411 -7.4
10yr 3.375 -6.8Equities %FTSE100 5258.02 -1.03%
8/9/2019 Lloyds TSB JUL 30 FX Strategy Weekly
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Quantitative Market Analysis
GBP/USD, EUR/USD gain traction with gold, CRB Net CHF longs still rising
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 page6) are used to analyse foreign exchange to understand howstretched currencies may have become.
Speculative short GBP positions fell for a 6th successive week inthe week to July 20th, with the 13,000 drop in short reportedpositions marking the largest weekly drop since June 15th.The next three weeks pose significant event risk for GBP andmay bring a reversal of bullish GBP flows as the GBP/USDventures into overbought territory and markets digest thePMIs and the MPC decision. Short EUR contracts were virtuallyunchanged at -33,000 vs -34,800 in the previous week. Thiseffectively cut back the short EUR/GBP spread to just 600contracts. Traction to the downside in EUR/GBP has howevernot emerged, with the 0.83-0.84 trading range staying inplace.
The reversal in AUD positioning gained further momentum aslong contracts were raised to 39,000, the highest since May11. Long CAD contracts were whittled back by 3,700 contractsto 39,000, marking a first drop in two weeks. Long CHFpositioning rose over the 20,000 mark to 21,000 contracts,marking a third successive rise. The decline in USD/CHFthrough 1.05 suggests a further accumulation of CHF longstook place over the past week. Long JPY exposure droppedfor the first time since positions flipped to positive during theweek of June 29.
The fact that overall USD short positioning has stabilisedaround -14,000 contracts (dollar index) is indicative of thereluctance by investors to heavily commit to a further leglower. Having said this, the dollar index has slipped below82.0 and faces a range of tests next week when the ISM
surveys and the July non-farm payrolls data are published.A breach of 81.46 Fibo support (88.752 the high, 74.17 thelow) brings a move to 80.0 into play, the 38.2% retracement.The fall in US 3-month libor below 0.50% and resultingwidening in US/G10 spreads has bolstered the attractivenessof a USD funded carry trade, with high yielders especiallylooking attractive in the context of positive Q2 earnings reportsand resilience of stocks. Lets see if this trading rationale canhold once the positive flow from company earnings subsides.
Only minor changes in risk reversal skews but the bias of agenerally more bearish backdrop grows vs the USD. GBP/USD skews continue to favour GBP calls. Though technicallywe have pointed out that the cross looks increasinglyoverbought (upper Bollinger), the percentile rank in riskreversal skews of 60% does not infer a great danger of acounter trend move. This is opposed to AUD/USD and USD/
CAD for example where percentile ranks are more elevated.EUR/USD risk reversals have also turned and at -1.71 are atthe highest level since April 28. Vol curves in EUR/USD and
EUR/GBP steepened to 1.59 and 1.76 respectively.
FX correlationsMarket correlations are shown on pages 10-12. 1-month rollingcorrelations are plotted for G-10 FX against interest ratespreads, S&P 500 and commodities (represented through theCRB index).
Correlation of G10 pairs with 2y spreads shot up across ourtarget currency pairs, marking an important change fromrecent weeks where statistically significant levels were confinedto EUR/USD, EUR/JPY and AUD/USD. GBP/USD joined the
fray with a correlation of 0.85. The drop to a new record lowfor US 2y yields below 0.55% (0.5461%) testifies to thesignificance of short-end rates in the present environment. Thiscontrasts to the longer-dated maturities which currently playan inferior role, with the exception perhaps of EUR/USD (0.80).
Correlation with equities have gained in significance for EUR/USD and GBP/USD but remain short of the 0.97 level forAUD/USD. The correlation of commodities has alsostrengthened to statistically relevant levels for a couple of pairs and except for AUD/USD now also include EUR/USDand GBP/USD. The latter two pairs have also picked uptraction with gold.
The danger of disappointing US data still looms. ISMsand non-farm payrolls are due next week.
AUDUSD USDCAD EURUSD GBPUSD USDJPY AUDJPY EURJPY
2 YR SPD 0.86 0.83 0.93 0.85 0.76 0.83 0.89
1 0 Y R SP D 0. 57 0. 49 0.80 0.73 0.44 0.66 0.77
S&P500 0.97 -0 .9 0 0 .79 0 .7 2 -0 .26 0.94 0.8 8
G ol d -0. 67 0. 43 - 0. 86 - 0. 80 0. 63 -0 .5 0 -0.77
Oil 0.88 -0.74 0.63 0.56 -0.26 0.85 0.67
elative Yield Curve 0.75 0.67 0.32 0.34 0.02 0.42 -0.01
CRB 0.92 -0.73 0.8 1 0.80 -0.50 0.8 1 0.77
8/9/2019 Lloyds TSB JUL 30 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 tothe close of business on the previous Tuesday. Traders are classified as either commercial or non-commercial. Thepositioning of the non-commercial traders can be used as a proxy for the speculative side of the market. Extremenet long or net short positions are taken as an indication of the markets vulnerability to a sharp reversal. For asqueeze to occur, however, a separate catalyst such as a piece of fundamental news or a breach of a key technicallevel is usually required.
5
EUR/USD
-140,000-120,000-100,000-80,000-60,000-40,000-20,000020,00040,00060,000
07-1004-1001-1010-09
contracts
1.181.23
1.281.331.38
1.431.481.53
$
Net-Long Non-Commercial Positions (CME) Spot Rate
GBP/USD
-100,000
-80,000
-60,000
-40,000
-20,000
0
07-1004-1001-1010-09
contracts
1.30
1.40
1.50
1.60
1.70
1.80$
Net-Long Non-Commercial Positions (CME) Spot Rate
USD/CHF
-30,000
-20,000
-10,000
0
10,000
20,000
07-1004-1001-1010-09
contracts
1.00
1.05
1.10
1.15
1.20SFr
Net-Long Non-Commercial Positions (CME) Spot Rate
USD/JPY
-80,000
-40,000
0
40,000
80,000
07-1004-1001-1010-09
contracts
85
90
95
100
JPY
Net-Long Non-Commercial Positions (CME) Spot Rate
USD/CAD
-80,000-70,000
-60,000-50,000-40,000
-30,000-20,000
-10,0000
07-1004-1001-1010-09
contracts
0.90
0.95
1.00
1.05
1.10
1.15
1.20C$
Net-Long Non-Commercial Positions (CME) Spot Rate
AUD/USD
0
20,000
40,000
60,000
80,000
100,000
07-1004-1001-1010-09
contracts
0.75
0.80
0.85
0.90
0.95$
Net-Long Non-Commercial Positions (CME) Spot Rate
GOLD
0
50,000
100,000
150,000
200,000
250,000
300,000
07-1004-1001-1010-09
contracts
800
900
1000
1100
1200
1300
$
Net-Long Non-Commercial Positions (CME) Spot Rate
SILVER
0
10,000
20,000
30,000
40,000
50,000
60,000
07-1004-1001-1010-09
contracts
12
1314
1516
17
1819
20$
Net-Long Non-Commercial Positions (CME) Spot Rate
OIL (NYMEX WTI)
0
20,00040,000
60,00080,000
100,000
120,000140,000
160,000
07-1004-1001-1010-09
contracts
50
5560
6570
75
8085
90$
Net-Long Non-Commercial Positions (CME) Spot Rate
10-YR TREASURY NOTES
-300,000
-250,000
-200,000
-150,000
-100,000
-50,000
0
07-1004-1001-1010-09
contracts
112
114
116
118
120
122
124
Net-Long Non-Commercial Positions (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
07-1004-1001-1010-09
contracts
99.1
99.2
99.3
99.4
99.5
99.6
99.7
99.8
Net-Long Non-Commercial Positions (CME) Spot Rate
EUR/GBP (derived)
-40,000
0
40,000
80,000
120,000
160,000
07-1004-1001-1010-09
contracts
0.82
0.84
0.86
0.88
0.900.92
0.94
Net-Long Non-Commercial Positions (CME) Spot Rate
EUR/CHF (de rive d)
-150,000
-100,000
-50,000
0
50,000
07-1004-1001-1010-09
contracts
1.40
1.421.44
1.461.48
1.501.52
1.54
SFr
Net-Long Non-Commercial Positions (CME) Spot Rate
USD POSITIONING
-40
-20
0
20
40
07-07 01-08 07-08 01-09 07-09 01-10 07-10
$ bn
70
75
80
85
90
SUM (INDIVUAL CURRENCY PAIRS) - LHSDXY - spot (RHS)
S&P 500 Future
-80,000
-60,000
-40,000
-20,000
0
20,000
07-1004-1001-1010-09
contracts
800
900
1000
1100
1200
1300
Net-Long Non-Commercial Positions (CME) Spot Rate
8/9/2019 Lloyds TSB JUL 30 FX Strategy Weekly
4/13
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 putoptions. 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 overa one-year period, with the positioning ranked and charted (in red) underneath the skew. If the skew and positioningare towards an extreme (we use above 75% or below 25% for the percentile rank), the risk of a contra-trend movein the underlying spot rate is high.
6
0%
20%
40%
60%
80%
100%
p e r c e n
t i l e r a n
k
EURUSD
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2 9 S e p 0 9
2 9 N
ov
0 9
2 9 J an1
0
2 9 M
ar 1
0
2 9 M
a y 1
0
2 9 J ul 1
0
2 5
d e l
t a s k e w
GBPUSD
-4.0
-3.0
-2.0
-1.0
0.0
2 9 S e p 0 9
2 9 N
ov
0 9
2 9 J an1
0
2 9 M
ar 1
0
2 9 M
a y 1
0
2 9 J ul 1
0
2 5 d e
l t a s
k e w
AUDUSD
-8.0
-6.0
-4.0
-2.0
0.0
2 9 S e p 0 9
2 9 N
ov
0 9
2 9 J an1
0
2 9 M
ar 1
0
2 9 M
a y 1
0
2 9 J ul 1
0
2 5 d e
l t a s
k e w
0%
20%
40%
60%
80%
100%
p e r c e n
t i l e r a n
k
0%
20%
40%
60%
80%
100%
p e r c e n
t i l e r a n
k
USDSEK
-3.00
-2.00
-1.00
0.00
1.00
2.00
3.00
4.00
2 9 S e p 0 9
2 9 N
ov
0 9
2 9 J an1
0
2 9 M
ar 1
0
2 9 M
a y 1
0
2 9 J ul 1
0
2 5 d e l
t a s k e w
USDNOK
-3.00
-2.00
-1.00
0.00
1.00
2.00
3.00
4.00
2 9 S e p 0 9
2 9 N
ov
0 9
2 9 J an1
0
2 9 M
ar 1
0
2 9 M
a y 1
0
2 9 J ul 1
0
2 5 d e l
t a s k e w
USDJPY
-4
-4
-3
-3
-2
-2
-1
-1
0
2 9 S e p 0 9
2 9 N
ov
0 9
2 9 J an1
0
2 9 M
ar 1
0
2 9 M
a y 1
0
2 9 J ul 1
0
2 5 d e l
t a s k e w
0%
20%
40%
60%
80%
100%
p e r c e n
t i l e r a n
k
0%
20%
40%
60%
80%
100%
p e r c e n
t i l e r a n
k
0%
20%
40%
60%
80%
100%
p e r c e n
t i l e r a n
k
NZDUSD
-8.00
-6.00
-4.00
-2.00
0.00
2 9 S e p 0 9
2 9 N
ov
0 9
2 9 J an1
0
2 9 M
ar 1
0
2 9 M
a y 1
0
2 9 J ul 1
0
2 5 d e l
t a s k e w
USDCAD
-1.00
0.00
1.00
2.00
3.00
4.00
2 9 S e p 0 9
2 9 N
ov
0 9
2 9 J an1
0
2 9 M
ar 1
0
2 9 M
a y 1
0
2 9 J ul 1
0
2 5 d e l
t a s k e w
USDCHF
-1.00
-0.50
0.00
0.50
1.00
1.50
2.00
2 9 S e p 0 9
2 9 N
ov
0 9
2 9 J an1
0
2 9 M
ar 1
0
2 9 M
a y 1
0
2 9 J ul 1
0
2 5 d e l
t a s k e w
0%
20%
40%
60%
80%
100%
p e r c e n
t i l e r a n
k
0%
20%
40%
60%
80%
100%
p e r c e n
t i l e r a n
k
0%
20%
40%
60%
80%
100%
p e r c e n
t i l e r a n
k
8/9/2019 Lloyds TSB JUL 30 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 resultin a higher option price, if other factors were unchanged. Implied volatility is traded in the markets and is thereforealso dependent upon supply and demand for options. In periods of uncertainty or illiquidity, implied volatility will climbhigher. One-month and one-year implied volatility is shown in the charts below.
7
EURUSD
9
11
13
15
17
19
21
3 0 J u l
0 9
3 0 O c t 0 9
3 0 J a n 1
0
3 0 A
p r 1
0
3 0 J u l 1
0
%
1-month 1-yr
GBPUSD
9
11
13
15
17
19
21
3 0 J u l
0 9
3 0 O c t 0 9
3 0 J a n 1
0
3 0 A
p r 1
0
3 0 J u l 1
0
%
1-month 1-yr
AUDUSD
81012141618
2022242628
3 0 J u l
0 9
3 0 O c t 0 9
3 0 J a n 1
0
3 0 A
p r 1
0
3 0 J u l 1
0
%
1-month 1-yr
NZDUSD
1113
151719
2123252729
3 0 J u l
0 9
3 0 O c t 0 9
3 0 J a n 1
0
3 0 A
p r 1
0
3 0 J u l 1
0
%
1-month 1-yr
USDCAD
9
11
13
15
17
19
21
3 0 J u l
0 9
3 0 O c t 0 9
3 0 J a n 1
0
3 0 A
p r 1
0
3 0 J u l 1
0
%
1-month 1-yr
USDCHF
9
10
11
12
1314
15
16
3 0 J u l
0 9
3 0 O c t 0 9
3 0 J a n 1
0
3 0 A
p r 1
0
3 0 J u l 1
0
%
1-month 1-yr
USDSEK
10
12
14
16
18
20
22
2426
3 0 J u l
0 9
3 0 O c t 0 9
3 0 J a n 1
0
3 0 A
p r 1
0
3 0 J u l 1
0
%
1-month 1-yr
USDNOK
11121314
151617181920
3 0 J u l
0 9
3 0 O c t 0 9
3 0 J a n 1
0
3 0 A
p r 1
0
3 0 J u l 1
0
%
1-month 1-yr
USDJPY
910111213141516171819
3 0 J u l
0 9
3 0 O c t 0 9
3 0 J a n 1
0
3 0 A
p r 1
0
3 0 J u l 1
0
%
1-month 1-yr
8/9/2019 Lloyds TSB JUL 30 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 surprisesindice are provided by Citigroup. They are defined as weighted standard deviations of data surprises actualreleases vs. Bloomberg survey median. Relative data surprises between two countries have been calculated andgraphed below.
8
EURUSD
-150
-100
-50
0
50
100
150
3 0 J u l 1
0
0 2
J u n 1
0
0 5 A
p r 1
0
0 4 F
e b 1
0
0 8 D
e c 0 9
0 9 O
c t 0 9
1 2 A
u g 0 9
S u r p r i s e
I n d e x
1.18
1.23
1.28
1.33
1.38
1.43
1.48
S p o t R a t e
Economic Data Surprise Spread (RHS) Spot Rate (LHS)
USDJPY
-250
-200-150-100
-500
50100150200250
3 0 J u l 1
0
0 2
J u n 1
0
0 5 A
p r 1
0
0 4 F
e b 1
0
0 8 D
e c 0 9
0 9 O c t 0 9
1 2 A
u g 0 9
S u r p r i s e
I n d e x
85
87
89
91
93
95
97
99
S p o t R a t e
Economic Data Surprise Spread (RHS) Spot Rate (LHS)
GBPUSD
-100
-50
0
50
100
150
200
3 0 J u l 1
0
0 2
J u n 1
0
0 5 A
p r 1
0
0 4 F
e b 1
0
0 8 D
e c 0 9
0 9 O c t 0 9
1 2 A
u g 0 9
S u r p r i s e
I n d e x
1.40
1.45
1.50
1.55
1.60
1.65
1.70
1.75
1.80
S p o t R a t e
Economic Data Surprise Spread (RHS) Spot Rate (LHS)
USDCAD
-250
-200
-150-100
-50050
100150
200250
3 0 J u l 1
0
0 2
J u n 1
0
0 5 A
p r 1
0
0 4 F
e b 1
0
0 8 D
e c 0 9
0 9 O c t 0 9
1 2 A
u g 0 9
S u r p r i s e
I n d e x
1.00
1.02
1.04
1.06
1.08
1.10
1.12
S p o t R a t e
Economic Data Surprise Spread (RHS) Spot Rate (LHS)
USDSEK
-200
-150
-100
-50
0
50
100
150
3 0 / 0 7
/ 1 0
0 2
/ 0 6 / 1 0
0 5 / 0 4
/ 1 0
0 4
/ 0 2
/ 1 0
0 8 / 1 2
/ 0 9
0 9 / 1 0 / 0 9
1 2
/ 0 8 / 0 9
S u r p r i s e
I n d e x
6.0
6.5
7.0
7.5
8.0
8.5
S p o t R a t e
Economic Data Surprise Spread (RHS) Spot Rate (LHS)
USDCHF
-250
-200
-150
-100
-50
0
50
100
3 0 J u l 1
0
0 2
J u n 1
0
0 5 A
p r 1
0
0 4 F
e b 1
0
0 8 D
e c 0 9
0 9 O c t 0 9
1 2 A
u g 0 9
S u r p r i s e
I n d e x
1.00
1.02
1.04
1.06
1.08
1.10
1.12
1.14
1.16
1.18
S p o t R a t e
Economic Data Surprise Spread (RHS) Spot Rate (LHS)
AUDUSD
-100
-50
0
50
100
150
200
250
3 0 J u l 1
0
0 2
J u n 1
0
0 5 A
p r 1
0
0 4 F
e b 1
0
0 8 D
e c 0 9
0 9 O c t 0 9
1 2 A
u g 0 9
S u r p r i s e
I n d e x
0.550.600.65
0.700.750.800.850.900.951.00
S p o t R a t e
Economic Data Surprise Spread (RHS) Spot Rate (LHS)
NZDUSD
-150
-100
-50
0
50
100
150
3 0 J u l 1
0
0 2
J u n 1
0
0 5 A
p r 1
0
0 4 F
e b 1
0
0 8 D
e c 0 9
0 9 O c t 0 9
1 2 A
u g 0 9
S u r p r i s e
I n d e x
0.45
0.50
0.55
0.60
0.65
0.70
0.75
0.80
S p o t R a t e
Economic Data Surprise Spread (RHS) Spot Rate (LHS)
USDNOK
-100
-50
0
50
100
150
3 0 / 0 7
/ 1 0
0 2
/ 0 6 / 1 0
0 5 / 0 4
/ 1 0
0 4
/ 0 2
/ 1 0
0 8 / 1 2
/ 0 9
0 9 / 1 0 / 0 9
1 2
/ 0 8 / 0 9
S u r p r i s e
I n d e x
5.5
5.7
5.9
6.1
6.3
6.5
6.7
6.9
S p o t R a t e
Economic Data Surprise Spread (RHS) Spot Rate (LHS)
8/9/2019 Lloyds TSB JUL 30 FX Strategy Weekly
7/13
Interest Rate Spreads vs. FX
The charts below show interest rate spreads plotted against historical FX spot rates. The spreads are calculatedusing two-year interest rate swaps. A one-month rolling correlation (between the spot rate and the interest ratespread) is shown to identify time periods when interest rate spreads are driving FX movements.
9
EURUSD
-0.10.00.10.20.30.40.50.60.70.8
3 0 J u l 1
0
1 9 M
a y 1
0
0 8 M
a r 1
0
2 4 D
e c 0 9
1 3 O c t 0 9
3 1
J u l
0 9
2 Y
R a t e S p r e a d
1.18
1.23
1.28
1.33
1.38
1.43
1.48
1.53
S p o t R a t e
2Y Rate Spread (RHS)
Spot Rate (LHS)
USDJPY
0.0
0.2
0.40.6
0.8
1.0
1.2
3 0 J u l 1
0
1 9 M
a y 1
0
0 8 M
a r 1
0
2 4 D
e c 0 9
1 3 O c t 0 9
3 1
J u l
0 9
2 Y
R a t e S p r e a d
85
87
89
91
93
95
97
99
S p o t
R a t e
2Y Rate Spread (RHS)
Spot Rate (LHS)
GBPUSD
0.00.10.20.30.40.50.60.70.80.9
3 0 J u l 1
0
1 9 M
a y 1
0
0 8 M
a r 1
0
2 4 D
e c 0 9
1 3 O c t 0 9
3 1
J u l
0 9
2 Y
R a t e S p r e a d
1.301.351.401.451.501.551.601.651.701.75
S p o t R a t e
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
3 0 J u l 1
0
1 9 M
a y 1
0
0 8 M
a r 1
0
2 4 D
e c 0 9
1 3 O c t 0 9
3 1 J u l
0 9
2 Y
R a t e S p r e a d
0.90
0.95
1.00
1.05
1.10
1.15
S p o t R a t e
2Y Rate Spread (RHS)
Spot Rate (RHS)
USDSEK
-1.2
-1.0
-0.8
-0.6
-0.4
-0.2
0.0
0.2
3 0 J u l 1
0
1 9 M
a y 1
0
0 8 M
a r 1
0
2 4 D
e c 0 9
1 3 O c t 0 9
3 1
J u l
0 9
2 Y
R a t e S p r e a d
5.5
6.0
6.5
7.0
7.5
8.0
8.5
S p o t
R a t e
2Y Rate Spread (RHS)
Spot Rate (LHS)
USDCHF
0.0
0.10.20.30.40.50.60.70.80.91.0
3 0 J u l 1
0
1 9 M
a y 1
0
0 8 M
a r 1
0
2 4 D
e c 0 9
1 3 O c t 0 9
3 1
J u l
0 9
2 Y
R a t e S p r e a d
0.95
1.00
1.05
1.10
1.15
1.20
1.25
1.30
S p o t R a t e
2Y Rate Spread (RHS)
Spot Rate (LHS)
AUDUSD
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
3 0 J u l 1
0
1 9 M
a y 1
0
0 8 M
a r 1
0
2 4 D
e c 0 9
1 3 O c t 0 9
3 1
J u l
0 9
2 Y
R a t e S p r e a d
0.550.600.650.700.750.800.850.900.951.00
S p o t R a t e
2Y Rate Spread (RHS)Spot Rate (LHS)
NZDUSD
1.0
1.5
2.0
2.5
3.0
3.5
4.0
3 0 J u l 1
0
1 9 M
a y 1
0
0 8 M
a r 1
0
2 4 D
e c 0 9
1 3 O c t 0 9
3 1 J u l
0 9
2 Y
R a t e S p r e a d
0.45
0.50
0.55
0.60
0.65
0.70
0.75
0.80
S p o t R a t e
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
3 0 J u l 1
0
1 9 M
a y 1
0
0 8 M
a r 1
0
2 4 D
e c 0 9
1 3 O c t 0 9
3 1
J u l
0 9
2 Y
R a t e S p r e a d
4.5
5.0
5.56.0
6.5
7.0
7.5
S p o t R
a t e
2Y Rate Spread (RHS)
Spot Rate (LHS)
Correlation-1
0
1
8/9/2019 Lloyds TSB JUL 30 FX Strategy Weekly
8/13
S&P500 vs. FX
The charts below show the S&P500 plotted against historical FX spot rates. A one-month rolling correlation (betweenthe 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
2 9 J ul 1
0
1 8 M
a y 1
0
0 5 M
a r 1
0
2 3 D
e c 0 9
1 2
O c t 0 9
3 0 J ul
0 9
S & P 5 0 0
1.18
1.23
1.28
1.33
1.38
1.43
1.48
1.53
S p o t R a t e
S&P500
Spot Rate (LHS)
USDJPY
600
700
800
900
1000
1100
1200
1300
2 9 J ul 1
0
1 8 M
a y 1
0
0 5 M
a r 1
0
2 3 D
e c 0 9
1 2
O c t 0 9
3 0 J ul 0
9
S & P 5 0 0 i n v e r t e d
85
87
89
91
93
95
97
99
S p o t R a t e
S&P500
Spot Rate (LHS)
1
GBPUSD
600
700
800
900
1000
1100
1200
1300
2 9 J ul 1
0
1 8 M
a y 1
0
0 5 M
a r 1
0
2 3 D
e c 0 9
1 2
O c t 0 9
3 0 J ul
0 9
S & P 5 0 0
1.301.351.401.451.501.551.601.651.701.75
S p o t R a t e
S&P500
Spot Rate (LHS)
USDCAD
600
700
800
900
1000
1100
1200
1300
2 9 J ul 1
0
1 8 M
a y 1
0
0 5 M
a r 1
0
2 3 D
e c 0 9
1 2
O c t 0 9
3 0 J ul 0
9
S & P 5 0 0 i n v e r t e d
1.00
1.02
1.04
1.06
1.08
1.10
1.12
S p o t R a t e
S&P500
Spot Rate (RHS)
USDSEK
600
700
800
900
1000
1100
1200
1300
2 9 J ul 1
0
1 8 M
a y 1
0
0 5 M
a r 1
0
2 3 D
e c 0 9
1 2
O c t 0 9
3 0 J ul
0 9
S & P 5 0 0 i n v e r t e d
5.5
6.0
6.5
7.0
7.5
8.0
8.5
S p o t R a t e
S&P500
Spot Rate (LHS)
USDCHF
600
700
800
900
1000
1100
1200
1300
2 9 J ul 1
0
1 8 M
a y 1
0
0 5 M
a r 1
0
2 3 D
e c 0 9
1 2
O c t 0 9
3 0 J ul 0
9
S & P 5 0 0 i n v e r t e d
0.95
1.00
1.05
1.10
1.15
1.20
1.25
1.30
S p o t R a t e
S&P500
Spot Rate (LHS)
AUDUSD
600
700
800
900
1000
1100
1200
1300
2 9 J ul 1
0
1 8 M
a y 1
0
0 5 M
a r 1
0
2 3 D
e c 0 9
1 2
O c t 0 9
3 0 J ul
0 9
S & P 5 0 0
0.550.600.650.700.750.800.850.900.951.00
S p o t R a t e
S&P500Spot Rate (LHS)
NZDUSD
600
700
800
900
1000
1100
1200
1300
2 9 J ul 1
0
1 8 M
a y 1
0
0 5 M
a r 1
0
2 3 D
e c 0 9
1 2
O c t 0 9
3 0 J ul
0 9
S & P 5 0 0
0.45
0.50
0.55
0.60
0.65
0.70
0.75
0.80
S p o t R a t e
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
2 9 J ul 1
0
1 8 M
a y 1
0
0 5 M
a r 1
0
2 3 D
e c 0 9
1 2
O c t 0 9
3 0 J ul 0
9
S & P 5 0 0 i n v e r t e d
5.0
5.5
6.0
6.5
7.0
7.5
S p o t R a t e
S&P500
Spot Rate (LHS)
Correlation
-1
0
1
8/9/2019 Lloyds TSB JUL 30 FX Strategy Weekly
9/13
Commodities vs. FX
The charts below show oil prices plotted against historical FX spot rates. A one-month rolling correlation (betweenthe 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
50
55
60
65
70
75
80
85
90
3 0 J ul 1
0
1 9 M
a y 1
0
0 8 M
a r 1
0
2 4 D
e c 0 9
1 3 O c t 0 9
3 1
J ul 0
9
O I L
1.18
1.23
1.28
1.33
1.38
1.43
1.48
1.53
S p o t R a t e
Oil (RHS)
Spot Rate (LHS)
USDJPY
20
30
40
50
60
70
80
90
100
3 0 J ul 1
0
1 9 M
a y 1
0
0 8 M
a r 1
0
2 4 D
e c 0 9
1 3 O c t 0 9
3 1
J ul
0 9
O I L
85
87
89
9193
95
97
99
S p o t R a t e
Oil (RHS)
Spot Rate (LHS)
GBPUSD
20
30
40
50
60
70
80
90
100
3 0 J ul 1
0
1 9 M
a y 1
0
0 8 M
a r 1
0
2 4 D
e c 0 9
1 3 O c t 0 9
3 1
J ul 0
9
O I L
1.301.351.401.451.501.551.601.651.701.75
S p o t R a t e
Oil (RHS)
Spot Rate (LHS)
USDCAD
50
55
60
65
70
75
80
8590
3 0 J ul 1
0
1 9 M
a y 1
0
0 8 M
a r 1
0
2 4 D
e c 0 9
1 3 O c t 0 9
3 1
J ul
0 9
O I L
1.001.02
1.04
1.06
1.08
1.10
1.12
S p o t R a t e
Oil (RHS)
Spot Rate (LHS)
USDSEK
20
30
40
50
60
70
80
90
100
3 0 J ul 1
0
1 9 M
a y 1
0
0 8 M
a r 1
0
2 4 D
e c 0 9
1 3 O c t 0 9
3 1
J ul 0
9
O I L
6.56.7
6.97.17.37.5
7.7
7.9
8.18.3
S p o t R a
t e
Oil (RHS)
Spot Rate (LHS)
USDCHF
20
30
40
50
60
70
80
90
100
3 0 J ul 1
0
1 9 M
a y 1
0
0 8 M
a r 1
0
2 4 D
e c 0 9
1 3 O c t 0 9
3 1
J ul
0 9
O I L
0.95
1.00
1.05
1.10
1.15
1.20
1.25
1.30
S p o t R a t e
Oil (RHS)
Spot Rate (LHS)
AUDUSD
20
30
40
50
60
70
80
90
100
3 0 J ul 1
0
1 9 M
a y 1
0
0 8 M
a r 1
0
2 4 D
e c 0 9
1 3 O c t 0 9
3 1
J ul 0
9
O I L
0.550.600.650.700.750.800.850.900.951.00
S p o t R a t e
Oil (RHS)Spot Rate (LHS)
NZDUSD
20
30
40
50
60
70
80
90
100
3 0 J ul 1
0
1 9 M
a y 1
0
0 8 M
a r 1
0
2 4 D
e c 0 9
1 3 O c t 0 9
3 1
J ul 0 9
O I L
0.45
0.50
0.55
0.60
0.65
0.70
0.75
0.80
S p o t R a t e
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
60
70
80
90
100
3 0 J ul 1
0
1 9 M
a y 1
0
0 8 M
a r 1
0
2 4 D
e c 0 9
1 3 O c t 0 9
3 1
J ul
0 9
O I L
5.0
5.5
6.0
6.5
7.0
7.5
S p o t R a t e
Oil (RHS)
Spot Rate (LHS)
Correlation
-1
0
1
8/9/2019 Lloyds TSB JUL 30 FX Strategy Weekly
10/13
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
1.56
1.58
2 9/0 6/ 10 0 6/0 7/1 0 1 3 /0 7 /1 0 2 0/0 7/1 0 2 7/ 07 /1 0
EUR/USD
1.19
1.21
1.23
1.25
1.27
1.29
1.31
1.33
2 9/0 6/1 0 0 6/0 7/1 0 1 3/ 07 /1 0 2 0/0 7/ 10 2 7/ 07 /1 0
EUR/GBP
0.80
0.81
0.82
0.83
0.84
0.85
0.86
2 9/ 06 /1 0 0 6/ 07 /1 0 1 3/ 07 /1 0 2 0/0 7/1 0 2 7/ 07 /1 0
USD/JPY
86
87
88
89
2 9/0 6/1 0 0 6/0 7/1 0 1 3/ 07 /1 0 2 0/0 7/1 0 2 7/ 07 /1 0
AUD/USD
0.83
0.84
0.85
0.86
0.87
0.88
0.89
0.90
0.91
2 9/ 06 /1 0 0 6/ 07 /1 0 1 3 /0 7 /1 0 2 0/0 7/ 10 2 7/ 07 /1 0
NZD/USD
0.67
0.68
0.69
0.70
0.71
0.72
0.73
0.74
2 9/ 06 /1 0 0 6/0 7/1 0 1 3/0 7/1 0 2 0/0 7/ 10 2 7/0 7/ 10
USD/NOK
6.13
6.18
6.23
6.28
6.33
6.38
6.43
6.48
6.53
2 9/ 06 /1 0 0 6/ 07 /1 0 1 3/ 07 /1 0 2 0/0 7/ 10 2 7/ 07 /1 0
USD/SEK
7.20
7.30
7.40
7.50
7.60
7.70
7.80
7.90
2 9/ 06 /1 0 0 6/ 07 /1 0 1 3/0 7/1 0 2 0/ 07 /1 0 2 7/0 7/1 0
USD/CHF
1.04
1.05
1.05
1.06
1.06
1.07
1.07
1.08
1.08
1.09
2 9/ 06 /1 0 0 6/ 07 /1 0 1 3 /0 7 /1 0 2 0/0 7/1 0 2 7/0 7/1 0
USD/CAD
1.01
1.02
1.03
1.04
1.05
1.06
1.07
2 9/ 06 /1 0 0 6/ 07 /1 0 1 3/ 07 /1 0 2 0/0 7/1 0 2 7 /0 7/ 10
8/9/2019 Lloyds TSB JUL 30 FX Strategy Weekly
11/13
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
Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10
EUR/USD
1.18
1.23
1.28
1.33
1.38
1.43
1.48
1.53
Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10
EUR/GBP
0.80
0.82
0.84
0.86
0.88
0.90
0.92
0.94
0.96
Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10
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
0.97
0.99
1.01
1.03
1.05
1.07
1.09
1.11
1.13
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 30 FX Strategy Weekly
12/13
FX Snapshot
Currency performance vs. USD
Currency performance vs. GBP
Currency performance vs. EUR
14
Weekly Currency Performance vs. USD
-0.54
0.32
0.860.93
1.18
1.26
1.27
1.28
1.42
-1 -0.5 0 0.5 1 1.5 2
NZD
CAD
JPY
AUD
CHF
GBP
EUR
SEK
NOK
%
Monthly Currency Performance vs. USD
2.33
3.383.70
4.14
5.67
5.78
6.59
6.98
1.58
0 2 4 6 8
CAD
JPY
GBP
CHF
NZD
AUD
NOK
EUR
SEK
%
12month Currency Performance vs. USD
-7.52
-5.40
1.85
2.07
4.30
4.40
9.20
9.68
10.89
-10 -5 0 5 10 15
EUR
GBP
NOK
SEK
CHF
CAD
AUD
JPY
NZD
%
Weekly Currency Performance vs. GBP
-1.82
-1.27
-0.95
-0.38
-0.34
-0.07
0.00
0.07
0.19
-2 -1.5 -1 -0.5 0 0.5
NZD
USD
CAD
JPY
AUD
CHF
EUR
SEK
NOK
%
Monthly Currency Performance vs. GBP
-3.39
-1.75
-0.96
0.45
0.70
2.13
2.59
3.11
3.90
-4 -2 0 2 4 6
USD
CAD
JPY
CHF
NZD
AUD
NOK
EUR
SEK
%
12 month Currency Performance vs. GBP
-2.25
5.39
7.10
7.36
9.47
9.54
13.35
14.56
14.68
-5 0 5 10 15 20
EUR
USD
NOK
SEK
CHF
CAD
AUD
JPY
NZD
%
Weekly Currency Performance vs. EUR
-1.81
-1.27
-0.95
-0.40
-0.35
-0.07
0.00
0.03
0.14
-2 -1.5 -1 -0.5 0 0.5
NZD
USD
CAD
JPY
AUD
CHF
GBP
SEK
NOK
%
Monthly Currency Performance vs. EUR
-6.59
-4.91
-4.11
-3.11
-2.64
-2.36
-0.89
-0.43
0.87
-8 -6 -4 -2 0 2
USD
CAD
JPY
GBP
CHF
NZD
AUD
NOK
SEK
%
12 month Currency Performance vs. EUR
2.25
7.52
9.22
9.42
11.51
11.59
15.29
16.46
16.60
0 5 10 15 20
GBP
USD
NOK
SEK
CHF
CAD
AUD
JPY
NZD
%
8/9/2019 Lloyds TSB JUL 30 FX Strategy Weekly
13/13
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