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BNP Paribas FX Momentum Summary

Core Content

This document provides an overview of the BNP Paribas FX Momentum strategy as of 20 February 2018. It outlines the current momentum scores for major currencies and the methodology behind the strategy.

Key Currency Momentum Scores

• USD FX Momentum:

  • The bearish momentum has moderated, resulting in an overall score of +45 on a scale from -100 to +100.
  • USD rates and equity momentum remain very bullish.

• GBP FX Momentum:

  • GBP momentum has turned more bullish, increasing from +29 to +41.
  • This shift is primarily due to a more positive rates momentum.

• JPY FX Momentum:

  • JPY momentum has declined to -32, driven by increasingly negative rates and equity momentum.

• NZD FX Momentum:

  • NZD momentum has moderated slightly but remains the most bearish among G10 currencies with a score of -70.

Strategy Overview

• BNP Paribas FX Momentum is a strategy that measures the strength of a currency's trend, using a -100 to +100 scale.
• It evaluates the momentum of exchange rates, relative interest rates, and equity market performance.
• The strategy identifies trends using two moving averages: when the shorter moving average is above the longer one, the trend is considered bullish.
• The strategy has historically delivered a Sharpe ratio of 0.79 since 2002 based on a portfolio of major currency pairs.

Portfolio and Performance

• The FX Momentum portfolio is composed of equally-weighted baskets of each G10 currency, with position sizes determined by momentum scores and a 10% volatility target.
• The portfolio is indexed to 1 January 2010.
• The three-year plot of G10 currency momentum scores is included to illustrate trends over time.

Contacts

• Strategists and Economists:

  • Michael Sneyd, CFA – Global Head of FX Strategy & Cross-Asset Strategist
  • Sam Lynton-Brown – FX Strategist
  • Natalie Rickard – FX Strategist
  • Alexander Jekov – Graduate
  • Daniel Katzive, CFA – Head of FX Strategy North America
  • Vasilis Koutsaftis – FX Options Strategist
  • Wike Groenenberg – Head of Emerging Markets Research, CEEMEA & APAC
  • Marcelo Carvalho – Head of Emerging Markets Research, Latam
  • Piotr Chwiejczak – FX & IR CEEMEA Strategist
  • Sai Ulluri – FX & IR CEEMEA Strategist
  • Erkin Isik, CFA – FX & IR CEEMEA Strategist
  • Mirza Baig – Head of FX & IR Asia Strategy
  • Kun Shan – China Strategist
  • Tianhe Ji – China Strategist
  • Gabriel Gersztein – Head FX & IR Latam Strategy
  • Samuel Castro – FX & IR Latam Strategist
  • Gustavo Mendonca – FX & IR Latam Strategist

• Production and Editorial:

  • Barbara Consuelo – London
  • Amanda Grantham-Hill – London
  • Anna McLauchlin – London
  • Varghese Joseph – New York

Legal and Regulatory Information

• This document is non-independent research and is a marketing communication under MiFID II.
• It is intended for Professional Clients and Eligible Counterparties.
• No investment advice is provided, and the information is for informational purposes only.
• The document may contain hypothetical or back-tested performance data, which is not indicative of future results.
• Conflicts of interest may exist due to BNPP's involvement in transactions or advisory roles related to the entities mentioned.
• Confidentiality is required, and the document may not be shared without prior written consent.
• ETF and Option disclosures are included, highlighting the risks associated with these instruments and the potential for conflicts of interest.
• Securities may not be eligible for sale in all jurisdictions or to certain investors.

Additional Information

• All charts are sourced from Macrobond and BNP Paribas.

• The BNP Paribas Global Markets Website is referenced for further details.

• The Bloomberg references include:

  • Fixed Income Research (BPFR)
  • G10 Interest Rate Research (BPBS)
  • BNP Paribas Strategy Website
  • Emerging Markets Research (BPFR)
  • Market Economics (BPEC)

• The document is produced by BNP Paribas London Branch and is subject to UK and EU regulations.

Disclaimer

• This document is not investment research and is not intended to be relied upon for investment decisions.
• No liability is accepted for any loss arising from the use of this document.
• Past performance is not indicative of future results.
• No guarantees are made regarding the accuracy or completeness of the information provided.