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BNP Paribas FX Momentum Summary

Core Content

BNP Paribas FX Momentum is a strategy that measures the strength of a currency's bullish or bearish trend using a scale from -100 to +100. The strategy considers not only exchange rate momentum but also the momentum of interest rates and equity markets to provide a more comprehensive view of currency trends.

Key Currency Momentum Scores

• USD FX Momentum: Extremely bearish at a score of -100, similar to September 2017. This contrasts with US rates and equity market momentum, which remain bullish.
• CAD FX Momentum: Strongly bullish at a score of +56, with both FX and rates markets showing strong positive momentum.
• NZD FX Momentum: Overall remains bearish, but the FX component is approaching a neutral score.
• GBP FX Momentum: Moderately bullish at a score of +26.

Strategy Overview

The FX Momentum strategy uses a combination of FX drivers, including exchange rates, interest rates, and equity market performance, to detect trends. It identifies bullish or bearish trends by comparing short-term and long-term moving averages. When the short-term moving average is above the long-term one, the trend is considered bullish.

The strategy is based on a portfolio of equally weighted baskets of G10 currencies, with position sizes determined by the momentum scores and a 10% volatility target. Since 2002, the strategy has delivered a Sharpe ratio of 0.79.

Chart Information

• Chart 1: USD FX momentum extremely bearish
• Chart 2: Bullish CAD trend continues
• Chart 3: Strongly bearish NZD trend
• Chart 4: Moderate bullish GBP momentum

The overall momentum scores for each currency vary between -100 and +100, while the individual components vary between +/-33.3.

Portfolio Returns

The BNP Paribas FX Momentum portfolio returns are indexed to 1 January 2010 and reflect the performance of the strategy based on the momentum scores.

Legal and Regulatory Information

• This document is non-independent research and may be subject to conflicts of interest.
• It is intended for Professional Clients and Eligible Counterparties as defined by MiFID II.
• It does not constitute a prospectus, an advertisement, or an offer to buy or sell securities.
• The information may contain "Research" as defined under MiFID II unbundling rules and is only available to those who have signed up for BNP Paribas Global Markets Research packages or are out of scope of the MiFID II unbundling rules.

Disclaimer

• The information is based on public sources and may not be independently verified.
• No guarantees are made regarding the accuracy, completeness, or fitness for a particular purpose.
• Performance data may be based on back-testing and is for illustrative purposes only.
• Indicative prices and terms are not actual transaction terms and may vary significantly.
• No liability is accepted for any loss arising from the use of this document.

US Disclosures

• Options and ETFs discussed are subject to specific risks and may not be suitable for all investors.
• Some securities may be "restricted securities" and only available to Qualified Institutional Buyers or non-US persons.
• The report may be distributed only to certain categories of investors in the US, and transactions must be conducted through authorized BNPP entities.

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