20181025-法国巴黎银行-CEEMEA_FX__Tactically_going_long_the_Zloty_9页_414kb

CEEMEA FX Trade Idea Summary: Tactically Going Long the Zloty

Overview

This document presents a trade idea for the Polish Zloty (PLN) in the CEEMEA region, based on the BEER (Benchmarking Emerging Market FX Exchange Rate) model. The analysis suggests that the PLN is currently undervalued relative to its short-term fair value, and the strategy involves taking a long position in PLN against both the EUR and USD.

Key Messages

• The PLN is ~4.5% cheap to the theoretical short-term fair value.
• The fair value for EURPLN is estimated at 4.16, and for USDPLN at 3.53 in the short term.
• The strategy involves entering a long PLN position to capitalize on the undervaluation.
• Two trade ideas are presented:
  • Defensive Strategy: Short EURPLN via 3m forward at 4.3324 (9:48am NYT), with an initial target of 3.75% PLN appreciation against EUR and a stop loss at 4.435. Carry is +16bp per month.
  • Less Defensive Strategy: Short USDPLN via 3m forward at 3.7765 (9:48am NYT), with an initial target of 4.5% PLN appreciation against USD and a stop loss at 3.935. Carry is -6bp per month.
• Based on G-10 strategist views and internal models, the less defensive strategy is preferred due to the expectation of a weaker US dollar.

BEER Model Explanation

• The BEER model is a short-term approach that identifies the main factors driving the deviation between nominal and real effective exchange rates (REER).
• It uses relative inflation (PPP), terms of trade, and interest rate differentials as key drivers.
• Macroeconomic variables like GDP growth, external and fiscal balances are considered, but they do not add significant value to the short-term model.

How the Model Works

1. Compares the historical deviation between the nominal FX rate and PPP.
2. Models the gap using terms of trade, interest rates, and other relevant macroeconomic differentials.
3. Interest rate differentials account for carry and the economic growth cycle.
4. The model includes tests for causality, co-linearity, stationarity of residuals, and sign and statistical power of explanatory variables.

The Case of PLN

• The current market price is 4.7% above the fair value for EURPLN and ~7% above for USDPLN.
• The analysis suggests that the PLN is undervalued relative to its fair value, making it a good candidate for a long position.

Complementary Analysis

• A new model, the Global Risk Premium Model, is mentioned, which may lead to an overweight position in certain EM currencies.
• Recent recommendations for CEEMEA include:
  • Taking profits on the long ZAR strategy.
  • Taking profits on the short USDTRY recommendation.
  • Entering a short 5y CDS strategy for Turkey.

Legal and Compliance Notice

• This document is a marketing communication and not independent investment research.
• It is intended for Relevant Persons as defined under MiFID II.
• The document may include research content, which is available only to those who have signed up for BNPP Global Markets Research packages.
• BNPP may have conflicts of interest and may engage in transactions inconsistent with the views expressed.
• The indicative prices and targets are not binding and are based on internal models and assumptions.
• The performance data may be based on back-testing and is not indicative of future results.
• The information is not guaranteed for accuracy or completeness and should not be relied upon as such.

Additional Disclosures

• Options and ETFs discussed in the document involve high risk and may not be suitable for all investors.
• Restricted securities may not be registered under US securities laws and are only available to Qualified Institutional Buyers (QIBs) or non-US persons.
• The report is distributed in various jurisdictions, including UK, France, Germany, Belgium, Ireland, Italy, Netherlands, Portugal, Spain, and Switzerland, each with specific regulatory requirements and authorizations.