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BNP Paribas FX Momentum Summary (17 October 2017)

Core Content Overview

BNP Paribas FX Momentum is a strategy that evaluates the strength of currency trends using a scoring system ranging from -100 to +100. The strategy considers not only exchange rate momentum but also the momentum of relative interest rates and equity market performance to provide a more comprehensive view of currency trends.

The report outlines the current momentum scores for various currencies, with a focus on G10 currencies. It also includes details about the FX Momentum strategy's historical performance and legal disclaimers.

Key Momentum Insights

• NZD Momentum: Remains very bearish at -69, one of the lowest scores in two years. This indicates a strong downward trend for the New Zealand Dollar.
• SEK Momentum: Has been bullish for most of the year and continues this week. It holds the most bullish momentum among G10 currencies.
• CAD Momentum: Appears bullish at +28, with Canadian interest rates showing extremely bullish momentum.
• USD and EUR Momentum: Both remain neutral overall. However, the USD FX component is very bearish, suggesting a weak trend in the US Dollar.
• Chart Context:
  • Chart 1 shows the bearish trend of NZD at a multi-year extreme.
  • Chart 3 illustrates that SEK momentum has rarely been bearish since 2014.
  • Chart 2 highlights the bearish nature of USD FX momentum.
  • Chart 4 indicates that CAD rates momentum is very bullish.

Strategy Details

• The FX Momentum strategy uses a combination of FX drivers and exchange rate momentum to assess currency trends.
• It employs two moving averages to identify trends: when the shorter moving average is above the longer one, the trend is considered bullish.
• The strategy has historically provided a Sharpe ratio of 0.79 since 2002, based on trading a basket of major currency pairs.

Portfolio Returns

• The FX Momentum portfolio returns are indexed to 1 January 2010 and are based on equally weighted baskets of each G10 currency with position sizes determined by momentum scores and a 10% volatility target.

Legal and Distribution Information

• This document is a marketing communication and is not investment research.
• It is intended for Professional Clients and Eligible Counterparties under MiFID.
• BNP Paribas and its affiliates may have financial interests in the securities or entities mentioned, and may engage in transactions inconsistent with the views expressed.
• The document is subject to legal disclaimers regarding the accuracy, completeness, and non-reliability of the information provided.

Contacts

FX - Global Strategy Contacts

• Michael Sneyd, CFA: Global Head of FX Strategy & Cross-Asset Strategist, London
• Sam Lynton-Brown: FX Strategist, London
• Clara Leonard: FX Strategist, London
• Natalie Rickard: FX Strategist, London
• Daniel Katzive, CFA: Head of FX Strategy North America, New York
• Vasilis Koutsaftis: FX Options Strategist, New York

Emerging Markets FX & IR Strategy Contacts

• Wike Groenenberg: Head of Emerging Markets Research, CEEMEA & APAC, London
• Marcelo Carvalho: Head of Emerging Markets Research, Latam, Sao Paulo
• Piotr Chwiejczak: FX & IR CEEMEA Strategist, London
• Sai Ulluri: FX & IR CEEMEA Strategist, London
• Erkin Isik, CFA: FX & IR CEEMEA Strategist, Istanbul
• Mirza Baig: Head of FX & IR Asia Strategy, Singapore
• Dawn Kwa: Graduate, Singapore
• Altaz Daghia: AU/NZ IR Strategist, Singapore
• Kun Shan: China Strategist, Shanghai
• Tianhe Ji: China Strategist, Beijing
• Gabriel Gersztein: Head FX & IR Latam Strategy, Sao Paulo
• Samuel Castro: FX & IR Latam Strategist, Sao Paulo
• Gustavo Mendonca: FX & IR Latam Strategist, Sao Paulo

Distribution and Legal Notice

• The document is produced by BNP Paribas London Branch and is intended for the use of intended recipients only.
• It is not to be reproduced, delivered, or transmitted to any other person without prior written consent.
• BNP Paribas and its affiliates may have conflicts of interest and may engage in transactions that are not aligned with the views expressed in this report.
• The document is not a prospectus, nor is it intended to be relied upon as such.
• It contains simulated performance data and is not a guarantee of future results.
• All information is provided on a confidential basis and may not be shared without prior consent.

Disclaimer

• The information in this document is based on public sources and may not have been independently verified.
• BNP Paribas does not accept responsibility for the accuracy or completeness of the information.
• The indicative prices and performance data are for informational purposes only and do not represent actual transaction terms.
• The document may include references to restricted securities, which are only available to Qualified Institutional Buyers or non-US persons under Regulation S.