jyske bank jun 24 fx spot on
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FX SPOT ONFX Research 24 June 2010 Jyske Markets
Publisher:
Jyske Markets
Vestergade 8 -16
DK - 8600 Silkeborg
Analysts:
Helle Varming
+45 89 89 71 05hv@jyskebank.dk
Linda Vestergrd
+45 89 89 76 62
Linda.vestergaard
@jyskebank.dk
Kent Bk Iversen
+45 89 89 76 63
Kent_iversen
@jyskebank.dk
Macroeconomic
analyst:
Kim Fster
+45 89 89 71 67
kf@jyskebank.dk
Translation:
Translation Services
Read more FX research
report at
www.jyskemarkets.com
Disclaimer:
Please see the last page
Overall expectations
After a very volatile month in the foreign-
exchange markets in May, volatility in general
abated in June. Panic about the debt crisis in
Southern Europe has subsided, but the subjectis certainly still topical, and it will remain so
for the coming months. The countries in
Southern Europe need to show that they are
actually capable of implementing the pro-
posed budget cuts. That is a time-consuming
process, so there is no hope that market par-
ticipants concern in that respect will evapo-
rate in the near future. It adds to uncertainty
that there are also countries outside Southern
Europe which show vulnerability in respect of
public debt (albeit not to the same extent as
for instance Greece). Therefore focus may well
move from Southern Europe to other regions
at some point. Regular indications that con-
solidation of the public finances is proceeding
according to plan (as happened for Greece on
17 June), would reduce uncertainty. The pre-
vailing uncertainty among investors is also
evident in the fact that the foreign exchange
markets tend to be very sensitive to politi-
cally-motivated announcements. That is what
happened at the beginning of June when an-
nouncements by the Hungarian government,
which had just taken up office, comparing
Hungary with Greece, caused havoc in the for-
eign-exchange markets.
Because of the sharp focus on the debt prob-
lems in Southern Europe, economic indicators
have been of little importance to the foreign-exchange markets for some time. Now that
panic about Southern Europe has abated, we
shall probably see the economic indicators
gaining more importance even in a situation
of high uncertainty. At such a time it is impor-
tant to remember the message that the global
upswing remains intact - despite the problems
in Southern Europe (read more in Upswing
still intact despite debt turmoil.
Risk scenarios
The greatest risk to global growth lies in a
flare-up of the financial crisis in the wake of
the Greek crisis. This might be sparked if one
or more of the Southern European countries
were to default or to apply for debt restruc-
ture. In spite of the rescue package, this sce-
nario might still be the case for Greece, and
several other Southern European countries are
at risk. Debt restructure would hit the Euro-
pean banks hard, since they hold large portfo-
lios of government bonds issued by the South-
ern European countries.
- We hope you will enjoy reading FX - SPOT ON -
An overview An overview
Overall expectations and risk scenarios
FX outlook
yske Bank's FX forecasts
The past month in review
The development in the markets over the past month
This months special report
Upswing still intact - despite debt turmoil
FX overview
USD, GBP, CHF, JPY, NOK, SEK, CZK, PLN, HUF, TRY, MXN, BRL, ZAR og CNY
FX forecasts including consensus estimates
How do Jyske banks forecasts deviate from consensus?
Economic forecasts
yske Banks forecast for other assets traded
Page 1
Pages 2-3
Page 4
Pages 5-6
Pages 7-23
Pages 24-25
Page 26
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FX SPOT ONFX Research 24 June 2010 Jyske Markets
Majors & ScandiesCentral-bank
rate
Against
EUR USD DKK GBP*
EUR
Spot 1.00% - 1.23 7.44 1.21
3M 1.00% - 1.20 7.45 1.20
6M 1.00% - 1.17 7.45 1.22
12M 1.00% - 1.27 7.45 1.25
USD
Spot 0-0.25% 1.23 - 6.06 1.49
3M 0-0.25% 1.20 - 6.21 1.45
6M 0-0.25% 1.17 - 6.37 1.43
12M 0.50% 1.27 - 5.87 1.59
GBP
Spot 0.50% 0.83 1.49 9.01 -
3M 0.50% 0.83 1.45 8.98 -
6M 0.50% 0.82 1.43 9.09 -
12M 1.00% 0.80 1.59 9.31 -
JPY
Spot 0.10% 111 90.45 6.70 134.55
3M 0.10% 110 91.67 6.77 132.53
6M 0.10% 115 98.29 6.48 140.24
12M 0.10% 120 94.49 6.21 150.00
CHF
Spot 0-0.75% 1.3601 1.11 5.47 1.65
3M 0-0.75%
See report:CHF: Still moving upwards6M 0-0.75%
12M 0-1.00%
NOK
Spot 2.00% 7.95 6.47 0.94 9.62
3M 2.00% 8.00 6.67 0.93 9.64
6M 2.25% 7.95 6.79 0.94 9.70
12M 2.75% 7.90 6.22 0.94 9.88
SEK
Spot 0.25% 9.53 7.75 0.78 11.54
3M 0.50% 9.50 7.92 0.78 11.45
6M 1.00% 9.40 8.03 0.79 11.46
12M 1.50% 9.35 7.36 0.80 11.69
DKK
Spot 1.05% 7.44 6.06 - 9.01
3M 1.05% 7.45 6.21 - 8.98
6M 1.05% 7.45 6.37 - 9.09
12M 1.15% 7.45 5.87 - 9.31
Note: All the exchange rates are quoted in accordance with inter-bank conventions except for the columnmarked (*) which has GBP as the base currency
Source: Bloomberg/Jyske Bank
Jyske Bank's FX forecasts
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https://jyskebank.com/wps/wcm/connect/b9b8fc0042f43a7886edefb6d1c19027/336658_CHFPilenpegerfortsatopad.pdf?MOD=AJPERES&CACHEID=b9b8fc0042f43a7886edefb6d1c19027https://jyskebank.com/wps/wcm/connect/b9b8fc0042f43a7886edefb6d1c19027/336658_CHFPilenpegerfortsatopad.pdf?MOD=AJPERES&CACHEID=b9b8fc0042f43a7886edefb6d1c19027https://jyskebank.com/wps/wcm/connect/b9b8fc0042f43a7886edefb6d1c19027/336658_CHFPilenpegerfortsatopad.pdf?MOD=AJPERES&CACHEID=b9b8fc0042f43a7886edefb6d1c19027https://jyskebank.com/wps/wcm/connect/b9b8fc0042f43a7886edefb6d1c19027/336658_CHFPilenpegerfortsatopad.pdf?MOD=AJPERES&CACHEID=b9b8fc0042f43a7886edefb6d1c19027 -
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FX SPOT ONFX Research 24 June 2010 Jyske Markets
Emerging MarketsCentral-bank
rate
Against
EUR USD DKK GBP*
CZK
Spot 0.75% 25.68 20.86 0.29 31.16
3M 0.75% 25.60 21.33 0.29 30.84
6M 0.75% 25.50 21.79 0.29 31.10
12M 0.75% 25.50 20.08 0.29 31.88
PLN
Spot 3.50% 4.08 3.31 1.83 4.95
3M 3.95 3.29 1.89 4.76
6M 3.90 3.33 1.91 4.76
12M 3.80 2.99 1.96 4.75
HUF
Spot 5.25% 280.56 227.89 0.27 340.50
3M 5.25% 280 233 0.27 337.35
6M 5.25% 270 231 0.28 329.27
12M 5.25% 270 213 0.28 337.50
TRY
Spot 7.00% 1.94 1.57 3.84 2.35
3M 7.00% 1.86 1.55 4.01 2.24
6M 8.00% 1.76 1.50 4.25 2.14
12M 9.50% 1.84 1.45 4.05 2.30
MXN
Spot 4.50% 15.59 12.66 0.48 18.92
3M 4.50% 15.30 12.75 0.49 18.43
6M 4.50% 14.63 12.50 0.51 17.84
12M 14.92 11.75 0.50 18.65
BRL
Spot 10.25% 2.20 1.79 3.38 2.67
3M 11.75% 2.20 1.83 3.39 2.65
6M 12.50% 2.11 1.80 3.54 2.57
12M 2.16 1.70 3.45 2.70
ZAR
Spot 6.50% 9.29 7.55 0.80 11.28
3M 6.50% 9.20 7.67 0.81 11.1
6M 6.50% 9.10 7.78 0.82 11.1
12M 9.00 7.09 0.83 11.3
CNY
Spot 5.31% 8.39 6.81 0.89 10.18
3M 8.04 6.70 0.93 9.69
6M 7.72 6.60 0.96 9.42
12M 8.19 6.45 0.91 10.24
Note: All the exchange rates are quoted in accordance with inter-bank conventions except for the columnmarked (*) which has GBP as the base currency
Source: Bloomberg/Jyske Bank
Jyske Bank's FX forecasts cont.
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FX SPOT ONFX Research 24 June 2010 Jyske Markets
By Helle Varming
Pressure on EUR has eased a bit
Generally the sentiment in the financial markets
has improved throughout June, and volatilities
have been on the decrease. However, in mid-
June a spokesperson from the Hungarian
government compared Hungary to Greece, and
therefore nervousness re-emerged and put
EUR/USD under pressure. The Hungarian
government was, however, quick at quieting
down things and therefore the statements never
triggered any actual panic. The market reactions
revealed that investors are still very jittery, but
despite this, the VIX index has fallen decently
over the last weeks of June. The improving
sentiment also somewhat eased the pressure on
EUR/USD, which at this point in time is more or
less unchanged relative to the level at which it
opened at the beginning of the month.
GBP develops favourably but debt weighs
In early June, GBP saw some support when it
became clear that the British insurance company
Prudentials purchase of the US AIG Asia would
not materialise after all. The economic situation
of the UK, with a growing budget deficit and a
massive debt burden, did however, put a damper
on the potential offered by GBP, as investors
feared the rating agencies would downgrade
their credit rating of the UK. However, all other
things being equal, the early reactions - after the
publication of the UK crisis budget on 22 June -
were encouraging and thus GBP found further
support. So far, pound sterling has appreciated
by just above 2% against the euro this month.
JPY at the mercy of the markets
In mid-June, political uncertainty in Japan
resulted in pressure on the yen as Prime Minister
Hatoyama had to resign due to political friction
in Japan. To a great degree, however, the general
market sentiment has governed the
development of the Japanese yen, and even
though the sentiment has improved slightly in
recent days, the uncertainty in the markets has
after all kept the yen at fairly high levels. HenceEUR/JPY is currently almost 1% lower than at the
beginning of the month.
Swiss franc continues to increase
The interest-rate meeting of the Swiss National
Bank turned out to be a milestone event and our
scenario of a possible shift to a higher level has
not become less likely. The interest rates may
have been kept unchanged, but SNBs
subsequent comment did not contain the well-
known remark that it would 'prevent any excess
strengthening of the Swiss franc'. Instead the
SNB said that it would intervene if the
appreciation again becomes a problem in
respect of renewed risk of deflation but stated
also that the threat of deflation has generally
been eliminated. These comments offereddecent support to the Swiss franc (which had
already begun to increase), and so far this
month the currency has strengthened by almost
6% against the euro.
Little news from Scandinavia
Generally the general market sentiment defined
the direction for the Scandinavian currencies
this past month, and generally we have seen
minor fluctuations for the Norwegian krone as
well as the Swedish krona. In mid-June, centralbank governor Ingves stated that the Swedish
economy is on such a strong footing that
Sweden has weathered the worst part of the
crisis. This offered support to the Swedish krona
for a short while, but compared to the levels at
the beginning of the month both the Norwegian
krone and the Swedish krona are so far at more
or less unchanged levels against the euro.
Chart 1: Selected currencies (1 June2010 = 100)
The past month in review
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FX SPOT ONFX Research 24 June 2010 Jyske Markets
By The Macro Team
The upswing is strengthening and has spread
extensively. There are, however, considerable
differences between the pace of the economic
growth in the various countries. We maintain
our expectations of solid growth until the
autumn; we expect that subsequently the pace
will fall to a level somewhat below the normal
level. But the risk of lower-than-expected
growth has increased. The reasons are risks
threatening the upswing in this early phase,
including turbulence in the financial markets,
fiscal tightening and transition from stimuli-
fuelled growth to consumption- and
investment-fuelled growth. We now expect
that the first interest-rate hikes on the part of
the central banks in the US, the euro zone and
the UK will take place later than we previously
estimated.
Solid growth scenario with cracks
Growth is strong in EM Asia and Latin America
and quite solid in the US and Japan. On the
contrary, the progress in the euro zone is
somewhat more modest, prospects are that the
euro zone will lag further behind. Also within the
euro zone, there are big differences in the
growth pace from Southern Europe close to
sliding into recession to Northern Europe with
growth slightly below the normal level.
Global trade
Kilde: Reuters EcoWin & CPB
01 02 03 04 05 06 07 08 09
90
100
110
120
130
140
150
160
170
Indeks
90
100
110
120
130
140
150
160
170
Also the sectors vary considerably. We have
everything from the bubbling manufacturingindustry, a solid service sector to construction
characterised by post-traumatic stress. The
progress in industry is reflected in the global
trade. Trade now increases faster than during
the upswing in the period 2004-07 when we saw
the strongest growth since the early 80s.
Upswing in a new phase
Economic growth is still primarily based on
expansive fiscal and monetary policies as well as
inventory adjustment. However, the most recent
announcement from the G20 countries did show
that a shift is in the offing from an expansive
fiscal policy to stronger focus on tightening in
countries with a risk of unpleasant debt
dynamism. Also, prospects are that inventory
adjustment will offer less support. Therefore we
are nearing the time where consumer spending
and investment must take on the role as growth
engines for the upswing.
GDP growth
88
90
92
94
96
98
100
102
104
106
88
90
92
94
96
98
100
102
104
106
04 05 06 07 08 09 10 11
Indeks100=2
008:1
Euroland Japan USA
Stiplede linjer er Jyske Banks forventninger
Source: Reuters EcoWin og Jyske Bank
Boosting consumer spending
Compared with previous upswings, consumer
spending in the large industrialised countries
has so far been fairly modest. The reason is
undoubtedly the problems that consumers have
had in the form of capital losses, steep declines
in employment and rising unemployment.
Yet there are signs that these difficult conditions
are about to turn around. We have seenindications of slightly increasing house prices
and stabilising unemployment rates in various
places in the world. As the recession has been
Upswing still intact - despite debt turmoil
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FX SPOT ONFX Research 24 June 2010 Jyske Markets
extraordinarily long, we may see accumulated
demand in some countries that may boost
consumer spending. We do, however, expect
only a moderate upswing in consumer spending
as there will still be focus on saving andreduction of debt.
Prospects of increasing investments
Most countries still have ample of available
production capacity. However, quite a few EM
countries are facing capacity problems. The
steeply rising industrial production and
international trade support the need for
corporate investments. And indeed, the
businesses are seeing prospects of rising profits,
and the low interest rates also supportinvestment. On the other hand, there is still
focus on debt reduction. On the whole, we are
seeing increasing investment.
Higher demands on fiscal policy
Due to heavy budget deficits and steeply rising
national debts, there is focus on tightening of
the fiscal policy. These problems have been
aggravated due to the financial turbulence in
Southern Europe. Fiscal tightening will put a
damper on economic growth, but this will
primarily take place in 2011.
Fiscal policy rather than monetary policy
Fiscal tightening may to some extent replace
some of the interest-rate hikes that the central
banks would otherwise have implemented.
Another thing that may postpone any interest-
rate hikes is the development of inflation. It has
decreased considerably in several industrial
countries and is nearing a disturbingly low level.
Moreover, core inflation will normally fall at the
beginning of an upswing and therefore the
overall inflation may become even lower. Thisapplies to the US, the euro zone and the UK, and
therefore we now think the first interest-rate
hikes in these countries will be implemented
later than we thought previously.
Highest risks on the downside
The transition from an upswing fuelled by
temporary stimuli to one fuelled by consumer
spending and investments may result in a
slowdown in growth. The most recent financial
turbulence increases the risk of lower growth.
Particularly if it affects the global consumer and
business confidence that is important for
consumer spending and investment. Also, it will
also be a problem if due to the financial turmoil
the markets freeze. The renewed focus on fiscal
sustainability may trigger excessive tightening.
Particularly if at the same time the EM countries
in Asia initiate tightening measures, it may
dampen the economy too much and hence
weaken the global economy. There is, however,
also a risk that growth may be boosted to much
by accumulated consumer demand and need forinvestment.
Read more about Jyske Banks most recent macro-
economic forecast in the research reportUpswing
intact - despite debt turmoil
GDP estimates, %
2008 2009 2010* 2011*
The US 0.4 -2.4 3.2 (3.0) 2.9 (3.0)
Japan -1.2 -5.3 3.3 (1.7) 1.9 (1.7)
The eurozone 0.6 -4.1 1.0 (1.1) 1.4 (1.5)
The UK 0.5 -4.9 1.2 (1.3) 1.7 (1.8)
Sweden -0.6 -5.1 3.2 (1.7) 2.4
Norway 2.0 -1.5 1.9 (2.4) 2.6
Switzerland 1.8 -1.5 2.0 (1.9) 2.0
Emerging Markets
Latin America 4.4 -1.8 5.4 (4.1) 4.1 (3.9)
Central and Eastern
Europe
4.2 -5.5 4.1 (3.3) 4.1
Asia 6.9 5.7 8.4 (7.9) 7.6
* Estimates (from the previous edition of Global Economy in brackets)
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FX SPOT ONFX Research 24 June 2010 Jyske Markets
By Helle Varming
US dollar - USD
The panic about the debt crisis in Southern Europe
has waned somewhat since our last issue of FX
Spot On, and the euro has rallied slightly. However,
anxiety is just below the surface, and Spain and the
Spanish financial sector in particular have at-
tracted the interest of market participants for the
past weeks. Despite attempts at denial on the part
of official sources, market participants have been
wondering whether the Spanish government was
preparing to ask for economic assistance. If uncer-
tainty about Spain grows, this may scupper theyoung optimism in the financial market and may
put renewed pressure on the euro against the US
dollar. Moreover, anxiety may flare up again when
regular evaluations of the fiscal-policy attempts of
the euro countries become available. The euro has
taken heavy beatings through the first six months
of 2010. Fundamentally, there is is much to indi-
cate that the road ahead may hold rough spots yet
- for the ongoing debt crisis in the euro zone is still
fraught with uncertainty. Other things being equal,
this will tend to maintain pressure against the
single currency. Moreover, the upswing in the euro
zone is lighter than what we are seeing in the rest
of the world, and several countries in Southern
Europe are still threatened by recession. Therefore
we do not find it likely that the European Central
Bank will raise interest rates until June 2011,
whereas the Fed will probably act already in March.
Other things being equal, this indicates that the
dollar will strengthen a little more against the euro
over the coming months although not at the
speed which we have seen earlier. If the news flow
should suddenly present an overweight of bad
news for the dollar, there is a risk that the dollar
weakening we expect in the latter half of our esti-
mate period will suddenly materialise. A record-
high number of investors are positioned for addi-
tional weakening of the euro against the dollar,
and that increases the risk of a sharp movement if
market focus suddenly moves from the debt-ridden
euro zone to the growing debt burdens across the
Atlantic. However, at present we expect it to be
quite some time until fiscal-policy tightenings and
the public debt burden of the US hit the headlines
in earnest. Still, the spotlight might be directed at
the issue towards the US mid-term elections in
November.
Estimate - EUR/USD:
3M: 1.20
6M: 1.17
12M: 1.27
Pound Sterling - GBP
The predominant issues with regard to sterling
are still the huge public-sector deficits and the
growing debt burden. The most important task
for David Camerons new government is there-
fore to get the public finances back to a sustain-
able level. The long-awaited austerity budget,
which was announced on 22 June, was wel-
comed by the financial markets and helped to
support sterling. The budget is actually quite
ambitious, involving additional savings totalling
1.9% of GDP until 2015 as well as a VAT increase
from 17.5% to 20%, and obviously the govern-
ment wanted to signal that it will work ex-
tremely hard to balance the public finances.
After the announcement, the rating agency Fitch
stated that the budget constitutes a strong
policy statement and an ambitious plan to re-
duce the budget deficit. Moreover, Fitch indi-
cated that the budget will raise confidence in the
UK and emphasise its AAA status. As stated, the
budget offered support to GBP, but so far we
have not seen any actual enthusiasm. The UK
will be in for quite a job and the coming years
will show whether the economic cure in combi-
nation with global growth will suffice to save the
economy in the long term. Moreover, we do not
yet know whether the fiscal tightening and its
dampening effect on economic activity will af-fect the Bank of Englands monetary policy. We
still expect that GBP will appreciate over the
coming year, but we also think the uncertainty
indicates that progress will take place gradually.
Estimate - EUR/GBP:
3M: 0.83
6M: 0.82
12M: 0.80
In short
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FX SPOT ONFX Research 24 June 2010 Jyske Markets
Swiss franc - CHF
The Swiss franc is still gaining value, and our
scenario of a possible shift to a higher level has
not become less likely after the Swiss National
Banks interest-rate meeting in June. The SNB
left interest rates unchanged, but its subsequent
comment did not contain the well-known remark
that it would prevent any excess strengthening
of the Swiss franc. Instead the SNB announced
that it would intervene if the appreciation again
becomes a problem in relation to renewed risk of
deflation, but also stated that the threat of de-
flation has generally disappeared. Other things
being equal, this indicates that at this point in
time, the SNB is not very concerned that a CHF
appreciation may have serious consequences forthe domestic economy, and given these signals
there is every indication that CHF will appreciate
further. So for the time being, the SNB is leaving
interest rates unchanged due to the uncer-
tainty relating to the debt crisis in Southern
Europe. There is, however, a risk that before long
the SNB will begin to tighten its policy as the
development in the domestic economy in isola-
tion indicates that an interest-rate hike may be
appropriate. If this risk materialises, we see yet
another factor supporting the currency. On thewhole, we find much to indicate a stronger CHF,
and in our view the latest signals from the SNB
support the scenario we set up earlier that the
CHF is shifting to a different trading range. From
the technical point of view, there is support of
the EUR/CHF rate at around 136 for the short
term, but more and more things indicate that we
may see a test of 134.80.
Read more about the risk of a shift to a new level
in the analysisRisk of CHF appreciating further.
Japanese yen - JPY
The combination of a weakening euro and grow-
ing risk aversion in the markets has boosted the
yen for months. In recent weeks fears about a
euro-zone collapse have abated somewhat, and
the VIX index (which indicates the general risk
aversion in the markets) has been falling. Anxi-
ety is still not far away, and the more optimistic
undertone we have seen in the markets lately
still appears fragile. So far, we maintain our
estimate of the 3M EUR/JPY rate at 110. Still, inour view the anxiety that has characterised the
markets for the past months is merely a correc-
tion. Accordingly, we expect anxiety to decrease
further. Other things being equal, this will mean
that pressure against the yen will grow as inves-
tor appetite for risky assets increases. Another
thing in favour of a yen weakening over time is
the deflation spectre which acts as a heavy
damper on the Japanese economy. Although the
economic growth rate has been fairly high for
recent quarters, Japan has again had to struggle
with the deflation spectre, and in our view this
means that there are no prospects of interest-
rate hikes in Japan until some time in 2012.
Economies elsewhere in the world are still show-
ing signs of progress, and even if there are no
interest-rate hikes in the pipeline, for instance in
the US, the Fed is likely to begin to tighten itsmonetary policy in early 2011. The prospect of a
widening of the yield spread to the US, among
other countries, will add to the pressure against
the yen particularly towards the end of our
estimate period.
Estimate - EUR/JPY:
3M: 6,77 (110)
6M: 6,48 (115)
12M: 6,21 (120)
Norwegian krone - NOK
Increased anxiety among investors occasioned
by the debt crisis in the euro zone has abun-
dantly demonstrated that NOK is probably still
sensitive to higher risk aversion in the markets.
Overall, NOK is still supported to some extent by
healthy fundamentals and in particular by the
gradual tightening by Norges Bank of its mone-
tary policy. On earlier occasions we have argued
that the potential of NOK would probably be
relatively little among other things because
the exchange rate is by now back at pre-crisislevels, and because the focus on NOK is likely to
weaken when the worlds other central banks
begin to raise interest rates. To this should be
added the fact that the economic indicators
were somewhat disappointing at the beginning
of 2010, and that Norges Bank in its latest
monetary-policy report lowered its expectation
of interest rates to a single hike in the second
half of 2010. This bears out our expectation
expressed earlier that the potential of NOK will
be smaller this year than it was in 2009.Overall, we still expect NOK to be stable to
slightly stronger during our estimate period, but
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FX SPOT ONFX Research 24 June 2010 Jyske Markets
if anxiety in the financial markets intensifies,
NOK may again suffer a blow.
Estimate - EUR/NOK:
3M: 8.006M: 7.95
12M: 7.90
Swedish krona - SEK
The krona is still showing signs of weakness
when sentiment in the markets is depressed.
Although panic about the debt crisis in the euro
zone has abated somewhat, there is a risk that
anxiety may flare up now and then particularly
during the coming months and put pressure on
SEK. Unless the prevailing unrest in the markets
turns into stark panic, we find that SEK is likely
to find some support in the prospect of an early
interest-rate hike by the Riksbank. GDP growth
proved very high at the beginning of this year,
and the economic growth rates for Q2-Q4 2009
were subject to significant upward revisions.
This caused Jyske Banks macro economists to
raise their growth estimate for 2010 from 1.7%
to 3.2%. Indeed, several members of the Riks-
bank have made optimistic announcements
about the prospects of the Swedish economy,
and lately central bank governor Ingves stated
that the economy is on such a strong footing
that Sweden has weathered the worst part of the
crisis.
Other things being equal, it seems as if the Riks-
bank will begin to tighten its monetary policy,
and in our opinion, the first interest-rate hike
will be made after the monetary-policy meeting
on 1 July. However, there are many points of
uncertainty about the Swedish economy (among
other things the prevailing debt crisis in the euro
zone), and this fact indicates that the Riksbank
will only raise interest rates gradually, taking
the repo rate to 1.75% a year from now. All
things considered, the Swedish economy has
progressed well, and now that anxiety in the
markets seems to have abated somewhat, much
indicates that the value of SEK will continue to
edge up. But the EUR/SEK rate is almost back to
its old trading range from before the outbreak ofthe financial crisis, and we therefore do not ex-
pect SEK to strengthen significantly. Still, in view
of the more positive undertone in the markets in
general and the better prospects of growth in
particular, we have decided to raise our estimate
of SEK slightly.
Estimate - EUR/SEK:
3M: 9.50
6M: 9.40
12M: 9.35
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FX SPOT ONFX Research 24 June 2010 Jyske Markets
By Helle Varming
Country facts GDP and inflation (y/y)Per capita GDP (USD, 2008) 47,393
GDP growth (Q1 2010 (q/q)) 0.8%
Inflation (March 2010 (y/y)) 2.0%
Unemployment 9.7%
Central-bank rate 0-0.25%
Current account (% of GDP (2008)) -4.9%
Public debt (% of GDP (2008)) 70.4%
The worlds largest economy and one of the worlds highest GDP per capita. The largest trading partners are (%
of exports): Canada (20.1%), Mexico (11.7%) and China (5.5%). The large industries in the US include oil, steel,
auto and air transport. US GDP per sector: Service (79.6%), Manufacturing industry (19.2%), Agriculture (1.2%).
USD/DKK incl. forecast and forward rates Current account (C/A)
Current Account Current Account % GDPSource: Reuters EcoWin
80 85 90 95 00 05
%GDP
-7
-6
-5
-4
-3
-2
-1
0
1
Billion
USD
-225
-200
-175
-150
-125
-100
-75
-50
-25
0
25
Fundamental valuation Investment case
Based on the purchasing power parity, USD is
slightly undervalued (by about 1.5%) equilibrium
around 1.21 (EUR/USD) and 6.15 (USD/DKK).
We expect US growth to be markedly higher than
eurozone growth (at least twice as high) in both
2010 and 2011.
Interest-rate hike from the Fed in March 2011. ECB
will wait until June 2011.
The debt crisis in the euro zone and the need for
fiscal-policy tightening may have an adverse effect
on growth in the euro zone.
The debt crisis in Southern Europe and the
uncertainty about its consequences for growth will
also burden EUR over the coming months.
Relatively better prospects for the US economy will
support USD.
The yield spread will narrow in favour of USD over
the coming quarters.
USD is still in a technical uptrend.
Price triggers Risk factors
Relatively better growth data from the US
compared with the euro zone.
Narrowing of credit spread between Europe and
the US in the short end of the yield curve (up to 2Y)
will support USD.
Continuing nervousness that the Greek disease
will spread to e.g. Spain will put pressure on
EUR/strengthen USD until matters will be clarified
The Fed is setting the scene for a normalisation of
the monetary policy (e.g by removing the promise
to keep interest rates low and withdrawing
quantitative easing).
For the short term: risk of USD weakening since
the strengthening has been solid and the market is
stretched.
Decreasing concern about the situation in
Southern Europe may result in a EUR comeback.
Need for fiscal-policy tightening in the US may
delay the first interest-rate hike.
Any problems selling government bonds in the US
may put USD under pressure.
Doubt about the status of USD as a reserve
currency may enhance the pressure on USD.
US dollar - USD
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FX SPOT ONFX Research 24 June 2010 Jyske Markets
By Helle Varming
Country facts GDP and inflation (y/y)
Per capita GDP (USD, 2008) 43,736
GDP growth (Q1 2010 (q/q)) 0.3%
Inflation (March 2010 (y/y)) 3.4%
Unemployment 7.9%
Central-bank rate 0.5%
Current account (% of GDP (2008)) -1.5%
Public debt (% of GDP (2008)) 56.9%
The UK has one of the largest economies in Western Europe and is Europe financial centre. The largest trading
partners are (% of exports): The US (13.1%), Germany (11.5%), The Netherlands (7.8%). Banking and insurance
services make up the largest part of GDP: Service (80.4%), Manufacturing industry (18.2%), Agriculture (1.4%).
USD/DKK incl. forecast and forward rates Current account (C/A)
Fundamental valuation Investment case
GBP is undervalued by approx. 14% based on thepurchasing power parity equilibrium is approx.
0.73 (EUR/GBP) and 10.19 (GDB/DKK).
The upturn in the UK is still weak and massivesavings of public budgets will over the coming
years slow down growth further.
Inflation and inflation anticipations are, however,rising and this leaves BoE in a dilemma.
We expect a stable to slightly stronger GBP overthe coming months. The greatest potential in GBP
is some months ahead.
The end to quantitative easing and an interest-rate hike from the BoE in February 2011 (ECB will
wait until June 2011) will support pound sterling.
A gradual improvement of the economy andclarification about the new governments fiscal
line will reduce uncertainty related to sterling and
the risk premium in the long term.
Price triggers Risk factors
A widening of the yield spread to the euro zone (2Yand 10Y) will support sterling.
Economic indicators improve and the upturn gainsmomentum.
An end to the quantitative easing which keepsmarket rates artificially down.
Inflation will be more sustainable and hikes will bemade sooner than expected.
The UK falls back into recession and interest ratesremain low for a longer period than expected.
An escalation of the financial crisis may result in ahigh risk premium on GBP due to the exposure to
the financial sector in London.
Renewed uncertainty about the sustainability ofthe UK economy may raise doubt whether the UKwill be able to maintain its current credit rating.
The euro-zone countries succeeded in putting adamper on the worse uncertainty and EUR is lifted.
Pound Sterling - GBP
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FX SPOT ONFX Research 24 June 2010 Jyske Markets
By Helle Varming
Country facts GDP and inflation (y/y)
Per capita GDP (USD, 2008) 68,433
GDP growth (Q1 2010 (q/q)) 0.4%
Inflation (May 2010 (y/y)) 1.1%
Unemployment 3.8%
Central-bank rate 0-0.75%
Current account (% of GDP (2008)) 2.4%
Public debt (% of GDP (2008)) 42.4%
Switzerland has a wealthy and stable economy with GDP per capita among the highest in the world. The largest
trading partners (% of exports): Germany (33.3%), Italy (11%), France (9.4%). Important industries: machines,
watches, bank and insurance. GDP per sector: Service (73%), Manufacturing industry (23%), Agriculture (4%).
Risk of further CHF appreciation
Our scenario of an upward shift to a new level in the Swiss franc is still relevant (see
the research reportRisk of CHF appreciating furtherfrom 20 May).
At the June meeting, the Swiss National Bank (SNB) did maintain its rate, but its
subsequent comment did not contain the by now so well-known remark that it would
'prevent any excess strengthening of the Swiss franc'.
Instead the SNB said that it would intervene if the appreciation becomes a problem
again in respect of renewed risk of deflation.The SNB stated also that the threat of deflation has generally been eliminated.
This indicates that at this point in time, the SNB is not overly concerned that an
appreciation of the franc will have serious consequences for the economy, and with
these signals there is every indication that the franc will appreciate further.
The debt crisis in Southern Europe has so far prompted the SNB to leave interest rates
unchanged but seen in isolation developments in the domestic economy indicate that a
hike may soon be appropriate. When the SNB indicates a tightening of its monetary
policy, it will be another supportive factor for the currency.
Fundamentally, there are many indications of a stronger franc for the period ahead.
Technically, EUR/CHF is in a downtrend with resistance at the moment around 140 and
for the short term around 136-136.50.
It appears increasingly likely that we will see a test of 134.80 in EUR/CHF.
There are thus still many indications of a shift to a new level for the Swiss franc where
the new, strong level is maintained for both the short and long term.
Investors should therefore use corrections towards 140 in EUR/CHF to close Swiss
franc funding.
The new major range in EUR/CHF is now 122-140.
Link to research report in PDF-version including charts
Swiss franc CHF
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FX SPOT ONFX Research 24 June 2010 Jyske Markets
By Helle Varming
Country facts GDP and inflation (y/y)
Per capita GDP (USD, 2008) 38,271
GDP growth (Q1 2010 (q/q)) -2.3%
Inflation (April 2010 (y/y)) -1.2%
Unemployment 5.1%
Central-bank rate 0.1%
Current account (% of GDP (2008)) 3.2%
Public debt (% of GDP (2008)) 173.8%
In terms of GDP (PPP), Japan is the worlds third largest economy next to the US and China. The largest trading
partners (% of exports): The US (17.8%), China (16%), South Korea (7.6%). Japan produces: motorcycles,
electronics, ships and chemicals. GDP per sector: Service (66.4%), Manufacturing industry (27.9%), Agriculture
JPY/DKK incl. forecast and forward rates Current account (C/A)
Fundamental valuation Investment case
Based on purchasing power parity, JPY isovervalued equilibrium around 1.48 (EUR/JPY).
Growth declines e.g. the effect from the fiscal-policy easing fades away.
A number of factors puts a damper on growth,including the need to consolidate the public
finances, which are in a sorry state.
Deflation is again a reality in Japan, and in ourview this means that interest-rate hikes will not be
on the agenda until 2012 at the earliest.
We expect a yen weakening for the long term. Japan may look forward to a battle against
deflation until end-2011. The BoJ will not tighten
its monetary policy until 2012 at the earliest.
We expect, however, that the other G10 centralbanks will start tightening their monetary policyearly next year (BoE in February and Fed in March
2011).
A widening of the yield spreads will squeeze theyen.
Price triggers Risk factors
Increased appetite for risky assets. A widening of the yield spread between Japan and
the other G10 nations gives renewed focus on the
yen as a funding currency.
Renewed focus on the possibility of interventionmay put pressure on the yen.
The BoJ will increase the purchase of governmentbonds (extend the quantitative easing). Focus on the development in public debt (close to
200% of GDP) creates distrust in JPY.
Renewed outbreak of risk aversion due e.g. to thedebt crisis in the euro zone
The global crisis is slow in progress and thenormalisation of the interest-rate levels in the
other G10 countries is long in coming.
Technical breach of 108 for EUR/JPY may pave theway for further strengthening of JPY down towards100.
apanese yen - JPY
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FX SPOT ONFX Research 24 June 2010 Jyske Markets
By Helle Varming
Country facts GDP and inflation (y/y)
Per capita GDP (USD, 2008) 94,196
GDP growth (Q1 2010 (q/q)) 0.1%
Inflation (March 2010 (y/y)) 2.5%
Unemployment 3.7%
Central-bank rate 2.0%
Current account (% of GDP (2008)) 18.6%
Public debt (% of GDP (2008)) 56.1%
Norway has a solid and wealthy economy and one of the worlds highest per capita GDP. The largest trading
partners are (% of exports): The UK (27%), Germany (12.8%), The Netherlands (10.4%). Main industries: oil, gas,
shipbuilding and chemicals. GDP per sector: Service (76%), Manufacturing industry (21.1%), Agriculture (2.9%).
NOK/DKK incl. forecast and forward rates Current account (C/A)
Fundamental valuation Investment case
NOK is slightly undervalued with respect topurchasing power parity equilibrium 7.80
(EUR/NOK) and 95.4 (NOK/DKK).
The upswing in Norway has begun. Norges Bank has begun the normalisation of the
interest-rate level and has already hiked three
times by a total of 75 bp to 2% since October.
We expect growth of 1.9% and 2.6% in 2010 and2011, respectively, and we expect further hikes
totalling 100 bp to 3% at 12-months' term.
The krone has already strengthened somewhatover the past twelve months.
We believe in a stable to weak positivedevelopment in NOK over the coming year, as
Norges Bank will raise interest rates further, while
the majority of the other G10 central banks will
remain reluctant.
NOK has already strengthened by 15% in 2009,and we therefore assess that the potential will be
more limited in 2010 (2-3% over the year).
Price triggers Risk factors
Increased appetite for risky assets will supportNOK.
Further widening of the yield spread betweenNorway and the other G10 nations supports NOK
since the prospect of a positive return supports
the demand for NOK.
Any rises in the oil price may support NOK.
The NOK strengthening may prompt Norges Bankto postpone the hikes to help the weak
manufacturing industry to get back on track.
Growth has disappointed in early 2010 and if thistrends continue it may have consequences for
Norges Banks future interest-rate path.
A possible deterioration of the sentiment in thefinancial markets may put pressure on NOK.
Norwegian krone - NOK
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FX SPOT ONFX Research 24 June 2010 Jyske Markets
By Helle Varming
Country facts GDP and inflation (y/y)Per capita GDP (USD, 2008) 52,181
GDP growth (Q1 2010 (q/q)) 1.4%
Inflation (March 2010 (y/y)) 1.2%
Unemployment 8.8%
Central-bank rate 0.3%
Current account (% of GDP (2008)) 7.8%
Public debt (% of GDP (2008)) 46.7%
The Swedish economy has been hit hard by the global crisis but is slowly recovering. The largest trading partners
are (% of exports): Germany (10.4%), Norway (9.5%) Denmark (7.4%). Iron, steel, defence equipment and
automotive are the largest industries. GDP per sector: Service (70.5%), Manufacturing industry (28%),
EUR/SEK incl. forecast and forward rates Current account (C/A)
Fundamental valuation Investment case
SEK is undervalued based on purchasing powerparity equilibrium 7.60 (EUR/SEK).
The upswing will begin in 2010 after the deeprecession.
Consumers are still optimistic and the industryand the export are now also improving.
We expect growth in Sweden of 3.2% and 2.4% in2010 and 2011, respectively (we believe euro zone
growth will be 1-1.5% for the same period).
We expect the Riksbanken to begin to raiseinterest rates in July 2010 (ECB waits until mid-
2011).
Riksbanken has indicated that interest rates willbe hiked during the summer or early autumn.
The strong growth in early 2010 indicates aninterest-rate hike in July.
We expect that the difference in growth betweenSweden and the euro zone will be in favour of
Sweden.
The yield spread (2-year swap spread) to the eurozone will develop in favour of Sweden over the
coming quarters, and this will support the SEK.
Price triggers Risk factors
Increased appetite for risky assets will supportSEK.
Signals from the Riksbanken of a furthertightening of the monetary policy and an early
normalisation of the interest-rate level.
Positive surprises with respect to economicindicators both globally and locally (including
continuing improvements in exports).
An outbreak of risk aversion in the financialmarkets (e.g. based on a government-debt crisis).
The global upturn loses momentum, and theSwedish economy is put under renewed pressure.
Market rates reflect expected hikes of up to 75 bpin H2. Risk of disappointments if the crisis in the
euro zone escalates.
Swedish krona - SEK
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FX SPOT ONFC Research 24 June 2010 Jyske Markets
By Linda Vestergaard
Country facts GDP and inflation (y/y)
Per capita GDP (USD, 2008) 20,734
GDP growth (Q4 2009 (q/q)) 0.5%
Inflation (April 2010 (y/y)) 1.2%
Unemployment 8.7%
Central-bank rate 0.8%
Current account (% of GDP (2008)) -3.1%
Public debt (% of GDP (2008)) 36.3%
Compared with the other former communist states, the Czech Republic is the most stable and wealthy economy.
The largest trading partners are (% of exports): Germany (30.3%), Slovakia (6.6%), Russia (6.2%). Primary
industry: auto, metal and machinery. GDP per sector: Service (56.2%), Manufacturing industry (37.6%),
Agriculture (2.3%).
CZK/DKK incl. forecast and forward rates Current account (C/A)
Current Account Current Account % GDPSource: Reuters EcoWin
96 98 00 02 04 06 08
%GDP
-8
-7
-6
-5
-4
-3
-2
-1
0
1
2
3
Billion
CZK
-45
-40
-35
-30
-25
-20
-15
-10
-5
Fundamental valuation Investment case
The Czech Republic was also hit by the global
economic slowdown, but now the Czech economy
is beginning to show signs of growth. The activity
level in the Czech Republic is still relatively low.
The Czech Republic is a very open economy. A large
share of its exports goes to Germany. The upturn
in the Czech Republic will therefore proceed in line
with the upturn in Germany.
In comparison with the rest of the region, the
Czech banking sector is relatively healthy.
Over the next twelve months, we expect a
practically unchanged CZK against EUR and DKK.
CZK has already recovered considerably after the
strong weakening in 2008/09.
The Czech central bank (CNB) took the market by
surprise with an interest-rate reduction at its
meeting in early May. Together with the current
focus on the debt problems in the euro zone this
may delay the time for interest-rate hikes and
prevent a further strengthening of CZK.
Price triggers Risk factors
The CNB begins lifting its interest rates from the
record-low 0.75% (the prospects are relatively
long).
Focus on the debt problems in the euro zone fades.
The global upswing including the improvement inGerman and Czech economic growth continues.
Concern about the debt problems in the euro zone
escalates. The Czech Republic does not show the
same vulnerability with respect to public
indebtedness as for instance Greece but the theme
still tends to have an adverse effect on CZK.The CNB lowers its interest rates even further.
The global economic upswing is long in coming.
Czech koruna - CZK
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FX SPOT ONFX Research 24 June 2010 Jyske Markets
By Linda Vestergaard
Country facts GDP and inflation (y/y)
Per capita GDP (USD, 2008) 13858
GDP growth (Q4 2009 (q/q)) 13.13%
Inflation (May 2010 (y/y)) 2.02%
Unemployment (May 2010) 12.00%
Central-bank rate 3.50%
Current account (% of GDP (2008)) -5.09%
Public debt (% of GDP (2008)) 54.52%
Poland has successfully liberalised the economy since 1990. First in line to adopt the euro. Largest export
countries: Germany (24.4%), France (6%), Italy (5.9%). Large industries: machinery, iron, steel, coal, chemicals,
ships. GDP per sector: Service (67.3%), Manufacturing industry (28.1%), Agriculture (4.6%).
EUR/PLN incl. forecast and forward rates Current account (C/A)
Current Account
Current Account % GDPSource: Reuters EcoWin
01 02 03 04 05 06 07 08 09
%GDP
-5,5
-5,0
-4,5
-4,0
-3,5
-3,0
-2,5
-2,0
-1,5
-1,0
Billion
PLN
-17,5
-15,0
-12,5
-10,0
-7,5
-5,0
-2,5
Fundamental valuation Investment case
As the only country in the region, Poland camethrough the global slowdown in growth without
negative growth rates. Notably domestic demand
supported growth. Poland is in a strong
fundamental position for the period ahead.
Foreign-currency loans make up a lower proportionthan in e.g. Hungary - they constitute a lower risk
for the economy.
Polands weak point is the budget deficit whichwas 7.5% of GDP in 2009.
The zloty is still undervalued; we expect the zlotyto appreciate against the euro over the next 12
months.
The Polish central bank will begin to hike interestrates before the ECB. This will most likely not
happen until early 2011.
The degree of focus on the debt problems in partsof the eurozone may determine the timing and the
speed of a zloty appreciation.
Price triggers Risk factors
The governments privatisation plans for 2010should support the zloty.
Focus on debt problems in the euro zone fades. The Polish central bank begins to hike rates. There is likelihood of positive surprises from this
years budget deficit. If so, it would be positive for
the zloty.
Zloty is one of the regions most liquid currenciesand is used to take a negative view on the region.
If the pressure on the euro continues, there is riskthat the zloty may appreciate against the euro.
Higher-than-expected budget deficit. In April, the Polish central bank intervened for the
first time in ten years against the zloty. Furtherintervention is a risk but the new Central-Bank
Governor Belka appears less willing to use the
intervention tool.
Polish zloty PLN
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FX SPOT ONFX Research 24 June 2010 Jyske Markets
By Linda Vestergaard
Country facts GDP and inflation (y/y)
Per capita GDP (USD, 2008) 15477
GDP growth (Q1 2010 (q/q)) 0.88%
Inflation (May 2010 (y/y)) 5.06%
Unemployment (March 2010) 11.80%
Central-bank rate 5.25%
Current account (% of GDP (2008)) -7.19%
Public debt (% of GDP (2008)) 76.94%
Hungary is dependent on exports to the EU. Challenges due to high private indebtedness in foreign currencies.
Largest export countries: Germany (25.4%), Italy (5.2%), Romania (5.1%). Large industries: mining, machinery,
textiles, chemicals. GDP per sector: Service (62.4%), Manufacturing industry (34.3%), Agriculture (3.4%).
EUR/HUF incl. forecast and forward rates Current account (C/A)
Current Account
Current Account % GDPSource: Reuters EcoWin
01 02 03 04 05 06 07 08 09
%GDP
-9
-8
-7
-6
-5
-4
-3
-2
-1
0
1
BillionHUF
-500
-450
-400
-350
-300
-250
-200
-150
-100
-50
0
50
Fundamental valuation Investment case
A growth upswing is very dependent on rising
export demand (exports account for approx. 80% of
GDP).The Hungarian authorities are therefore not
interested in a much stronger forint. At the other
end is the large share of foreign-currency loans.
At the parliamentary election in April, Fideszreceived 2/3 of the votes. This gives the new
government the possibility to implement reforms
which are necessary to increase the countrys
potential growth rate.
After comments from the new government in early
June, the forint weakened. We see the concern as
exaggerated and expect EUR/HUF to return to the
265/280 range that the rate has been trading in
since mid-2009.
The fundamental case should prevent appreciationof the forint.
The central bank should be prepared to
hike/intervene extraordinarily if EUR/HUF moves
to 300.
Price triggers Risk factors
The political development is currently decisive for
the forint. The new governments future
cooperation with the IMF may be decisive (the
current loan programme expires in October 2010).
The next review of the programme is in July.
The forint is vulnerable to the current negative
focus on the debt problems in the eurozone since
Hungary shows similar vulnerabilities. The
important difference is that Hungary initiated the
consolidation of the public finances in late 2008
and has a better starting point than e.g. Greece.
Weakening of the forint since a large proportion ofthe total loans in Hungary is in the Swiss franc or
the euro.
Increasin risk aversion.
Hungarian forint HUF
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FX SPOT ONFX Research 24 June 2010 Jyske Markets
By Linda Vestergaard
Country facts GDP and inflation (y/y)
Per capita GDP (USD, 2008) 10484
GDP growth (Q4 2009 (q/q)) 2.0%
Inflation (April 2010 (y/y)) 9.10%
Unemployment 14.40%
Central-bank rate 6.50%
Current account (% of GDP (2008)) -5.65%
Public debt (% of GDP (2008)) 39.50%
The Turkish economy is a mix between modern industry and trade and a traditional agricultural sector. The
largest trading partners are (% of exports): Germany (9.8%), UK (6.2%) and China (7.8%). Large industries: textile,
auto and electronics. GDP per sector: Service (45.8%), Manufacturing industry (24.7%), Agriculture (29.5%).
EUR/TRY incl. forecast and forward rates Current account (C/A) 4 months average
Current Account
Current Account % GDPSource: Reuters EcoWin
90 92 94 96 98 00 02 04 06 08
%GDP
-7
-6
-5
-4
-3
-2
-1
0
1
2
3
4
Billion
USD
-12,5
-10,0
-7,5
-5,0
-2,5
0,0
2,5
Fundamental valuation Investment case
The upswing has now gained a firm foothold in
Turkey, and Turkey will report positive growth
again this year. This is supported by recent activity
indicators in Turkey.
A relatively healthy banking sector will support the
upswing.The government is working on initiatives to secure
fiscal discipline in Turkey. This is positive and will
reduce the risk involved in Turkish assets over the
lon term.
Seen in relation to before the sale of risky assets in
2008, the lira is still weaker against the euro and
the US dollar still catch-up potential.
The lira is a dollar-related currency, i.e. our
expectations of a fall in EUR/USD will support the
lira against the euro.
The timing of a lira strengthening will depend on
when the CBRT begins to signal hikes.
Price triggers Risk factors
The CBRT begins raising its interest rates from the
record-low 6.50%. This happens before the ECB and
the Fed begin raising their interest rates, i.e. the
relative risk premium on the lira increases.
Weaker euro/stronger US dollar.
The global upswing continues also in Turkey.
General risk appetite.
The largest risk for the lira against the euro is
currently a sharp appreciation of the euro against
the dollar.
The global economic upswing is long in coming.
Too aggressive and too early withdrawal of
monetary easing from the ECB and the Fed.
Debt problems in the euro zone escalate with aresultant general re-assessment of country risk.
The CBRT maintains interest rates at the current
6.50% rather than be innin to hike interest rates.
Turkish lira TRY
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FX SPOT ONFX Research 24 June 2010 Jyske Markets
By Kent Bk Iversen
Country facts GDP and inflation (y/y)Per capita GDP (USD, 2008) 10,217
GDP growth (Q4 2009 (q/q)) 2.1%
Inflation (May 2010 (y/y)) 3.9%
Unemployment 5.4%
Central-bank rate 4.5%
Current account (% of GDP (2008)) -1.5%
Public debt (% of GDP (2008)) 37.7%
Mexico is also called the 51st state of the US since the country is so dependent on exports to the US. Largest
export countries: The US 80.5%, Canada 3.8% and Germany 1.4%. Large industries: food, beverages, tobacco, oil
and chemicals. GDP per sector: Service (65%), Manufacturing industry (31%), Agriculture (4%).
EUR/MXN incl. forecast and forward rates Current account (C/A)
Current Account
Current Account % GDPSource: Reuters EcoWin
03 04 05 06 07 08 09
%GDP
-0,300
-0,275
-0,250
-0,225
-0,200
-0,175
-0,150
-0,125
-0,100
-0,075
BillionMXN
-50
-45
-40
-35
-30
-25
-20
-15
-10
-5
Fundamental valuation Investment case
We expect growth of 4% in 2010 and 2011 after
the worst recession in 2009 in living memory.
Much depends on developments in the US which
account for about 80% of Mexicos exports.
Given expected solid US growth in 2010 (3.2%) and
2011 (2.9%), exports will still be supported.Budding signs that domestic economy will also be
growth engine. Unemployment has fallen from
6.5% to 5.4%.
We expect the peso to strengthen against both
USD and EUR. Still catch-up potential to the levels
before Lehman collapse in the autumn of 2008.
MXN will appreciate the most against EUR in a
scenario with a concurrent fall in EUR/USD.
We see the highest potential at 3-6 months termdue to our expectation of EUR/USD in 117.
At 12 months term, the potential is more limited
due to our expectation of EUR/USD in 127.
Price triggers Risk factors
MXN has high correlation with USD so continued
USD appreciation will support MXN against EUR.
US growth and employment data.
Mexican growth and inflation data.
If the recovery gains momentum, the country may
be upgraded. S&P downgraded Mexico last year.
Mexico still has an investment-grade rating with astable outlook at the three major credit rating
agencies.
USD weakening is a risk factor.
In a scenario with sharply rising risk aversion and
flight to quality (like after the Lehman collapse
in 2008), the peso will depreciate against both the
dollar and the euro.
Intervention purchase of USD against MXN.
Political deadlock in Mexico. The Liberals hold thepresidency and the Social Democrats are biggest
in the parliament so reforms are difficult.
Mexican peso MXN
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FX SPOT ONFX Research 24 June 2010 Jyske Markets
By Kent Bk Iversen
Country facts GDP and inflation (y/y)Per capita GDP (USD, 2008) 8,626
GDP growth (Q1 2010 (q/q)) 2.7%
Inflation (May 2010 (y/y)) 5.2%
Unemployment 7.3%
Central-bank rate 10.3%
Current account (% of GDP (2008)) -1.7%
Public debt (% of GDP (2008)) 46.8%
South Americas largest economy and a powerful BRIK country. Has since 2002 improved its economy in key
areas. Largest export countries: The US (13.7%), Argentina (8.7%) and China (8.1%). Large industries: textiles,
auto, chemicals and wood. GDP per sector: Service (67.7%), Manufacturing industry (25.8%), Agriculture (6.5 %).
EUR/BRL incl. forecast and forward rates Current account (C/A)
Current Account [ma 3]
12 mth. Current Account % GDP
04 05 06 07 08 09
%GDP
-2,0
-1,5
-1,0
-0,5
0,0
0,5
1,0
1,5
2,0
Billion
USD
-5
-4
-3
-2
-1
0
1
2
3
Fundamental valuation Investment case
Brazil has escaped from the crisis; the GDP level
prior to the crisis was reached already in Q4 2009.
Brazil has Latin Americas highest growth rate.
We have just revised up our growth estimate for
2010 to 7.5% and 4.7% for 2011.
Inflation is moving up and the latest statementshowed 5.22% y/y, which is still within the target
of 2.5% 6.5%.
The country is gaining influence (BRIK country)
and is in focus on the global political scene.
The real is supported by an attractive interest-rate
level. Interest rates have been raised twice by 75
bp in 2010 to now 10.25%.
More hikes in store which will support the real.
A less dollar-related investment in Latin America
than MXN and COP.
Against the US dollar, the real is weaker than
before the Lehman collapse in 2008, so still catch
up. Against the euro, the real is weaker so limited
potential.
Price triggers Risk factors
Brazil has a BBB- rating (lowest investment grade).
Is in a strong position for an upgrade.
Presidential election in October. Lulas line is
expected to be continued, which is positive for BRL.
Fiscal tightening after the presidential election
will be welcomed by the financial markets.
Continued strong domestic growth and fairexports to the US and China make the country
immune to the eurozone crisis.
Intervention purchase of USD against BRL.
Higher taxes on capital flows. In late 2009, the
government introduced a 2% tax on capital flows.
Presidential election in October. Has not yet given
rise to movements in the market, but keep an eye
on statements on a more relaxed fiscal policy and
whether some candidates question the centralbanks independence.
Negative news on public indebtedness.
Brazilian real BRL
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FX SPOT ONFX Research 24 June 2010 Jyske Markets
By Kent Bk Iversen
Country facts GDP and inflation (y/y)Per capita GDP (USD, 2008) 5,685
GDP growth (Q1 2010 (q/q)) 1.1%
Inflation (April 2010 (y/y)) 4.4%
Unemployment 25.2%
Central-bank rate 6.5%
Current account (% of GDP (2008)) -7.1%
Public debt (% of GDP (2008)) 36.0%
Many natural resources and healthy banking sector but after-effects of apartheid e.g. high unemployment.
Largest export countries: Japan (11.1%), The US (11.1%) and Germany (6.8%). Large industries: mining,
machinery and textiles. GDP per sector: Service (64.4%), Manufacturing industry (32.1%), Agriculture (3.5%).
EUR/ZAR incl. forecast and forward rates Current account (C/A)
Current Account Current Account % GDPSource: Reuters EcoWin
96 98 00 02 04 06 08
%GDP
-8
-7
-6
-5
-4
-3
-2
-1
0
1
Billion
ZAR
-45
-40
-35
-30
-25
-20
-15
-10
-5
0
5
Fundamental valuation Investment case
The FIFA World Cup supports GDP directly in Q2-3.
Then the contribution will be more uncertain, but
we see more gains than risks.
Inflation under control and within target.
The current account is improving markedly.
Too many South Africans live on public aid.
Constitutes risk to public finances but is also
potential if they are educated and employed.
Buy the rand against the euro, e.g. via 10-year
bonds where we expect a yield decline from the
current level of 8.75% to 8.25% at 6 months term.
High real interest rate (almost 4%) supports the
rand.
Debt crisis in the eurozone does not spoil theglobal growth picture, which is very positive. Asia
is on the rise, which will support the rand due to
the large export of commodities to Asia.
We see EUR/ZAR in 9.00 at 12 months term.
Price triggers Risk factors
South Africa is currently on negative outlook at
S&P and Fitch. Change of negative outlook will be
positive.
Price rises of commodities (our main scenario).
Development in the US equity market. ZAR has a
high correlation with Dow Jones. Equity price
increases are thus positive for ZAR.EUR/ZAR has moved down since early 2009. We
expect the trend to continue and a test of 9.00 in
EUR/ZAR within 12 months.
South Africa is currently on negative outlook at
S&P and Fitch. A downgrade will be negative.
Intervention from the central bank if ZAR
continues to appreciate.
Falling US equity markets and price declines on
commodities.
Escalation of the problems in the Spanish bankingsector may at worst spread to South Africas very
healthy banking sector and cause ZAR to weaken.
South African rand ZAR
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FX SPOT ONFX Research 24 June 2010 Jyske Markets
By Linda Vestergaard
Country facts GDP and inflation (y/y)
Per capita GDP (USD, 2008) 3,404
-5
0
5
10
15
jan-200 4 okt-2006 jul -20 09 apr -20 12
Change(y/y)
GDP y/y CPI y/y
GDP growth (Q1 2010 (q/q)) 0.49%
Inflation (May 2010 (y/y)) 4.53%
Unemployment (March 2010) 4.20%
Central-bank rate 5.31%
Current account (% of GDP (2008)) 9.43%
Public debt (% of GDP (2008)) 36.26%
China has moved from planned economy to a rapidly growing market economy and is now a key player in the
global economy. Largest export countries: The US (17.7%), Hong Kong (13.3%), Japan (8.1%). Large industries:
mining, consumer discretionaries, machinery. GDP per sector: Manufacturing industry (48.6%), Service (40.5%),
USD/CNY incl. forecast and forward rates Current account (C/A)
Current Account
Current Account % GDP
04 05 06 07 08 09
%GDP
3
4
5
6
7
8
9
10
11
Billion
USD
50
100
150
200
250
300
350
400
450
Fundamental valuation Investment case
Until mid-2008, the exchange-rate policy in China
aimed at letting CNY strengthen gradually against
USD. But the global slowdown in growth hit China
too and the Chinese Central Bank (PBoC) changed
its policy. Since mid-2008, CNY has been fairly
stable against USD at 6.83.
The PBoC has already begun to tighten banks
reserve requirements and on 19 June the PBoC
announced increased flexibility of the yuan.
In principle, the PBoCs statement of increased
flexibility of the yuan does not vow anything about
future appreciation of the currency.
We expect it will lead to appreciation of the yuan
against the US dollar.
It will not be a revaluation of the yuan but agradual appreciation of the yuan against the US
dollar by 5%-6% a year.
Price triggers Risk factors
Continued strong growth indicators from China
although growth is expected to fall slightly.
Particularly the development of Chinas exports is
important to yuan appreciation.
Global growth continues to show signs of
improvement.
A longer period with a weakening of the US dollarmay lead to a sharper appreciation than the 5%-6%
against the US dollar a year.
Disappointing Chinese exports will put a damper
on a yuan appreciation.
So will a period of sharp appreciation of the US
dollar. It is not unlikely that such a scenario may
lead to a rise in USD/CNY.
Increasing risk aversion.
Chinese yuan CNY
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FX SPOT ONFX Research 24 June 2010 Jyske Markets
Majors & Scandies
Against
EUR Consensus USD Consensus DKK Consensus GBP* Consensus
EUR
Spot - - 1.23 - 7.44 - 1.21 -
3M - - 1.20 1.20 7.45 7.45 1.20 1.20
6M - - 1.17 1.20 7.45 7.45 1.22 1.22
12M - - 1.27 1.18 7.45 7.45 1.25 1.23
USD
Spot 1.23 - - - 6.06 - 1.49 -
3M 1.20 1.20 - - 6.21 6.21 1.45 1.45
6M 1.17 1.20 - - 6.37 6.21 1.43 1.46
12M 1.27 1.18 - - 5.87 6.31 1.59 1.46
GBP
Spot 0.83 - 1.49 - 9.01 - - -3M 0.83 0.83 1.45 1.45 8.98 8.98 - -
6M 0.82 0.82 1.43 1.46 9.09 9.09 - -
12M 0.80 0.81 1.59 1.46 9.31 9.20 - -
JPY
Spot 111 - 90 - 6.70 - 134 -
3M 110 113 92 94 6.77 6.59 133 136
6M 115 113 98 94 6.48 6.59 140 138
12M 120 116 94 98 6.21 6.42 150 143
CHF
Spot 1.36 - 1.11 - 5.47 - 1.65 -
3M - 1.38 - 1.15 - 5.40 - 1.66
6M - 1.37 - 1.14 - 5.44 - 1.67
12M - 1.38 - 1.17 - 5.40 - 1.70
NOK
Spot 7.94 - 6.46 - 0.94 - 9.62 -3M 8.00 7.81 6.67 6.51 0.93 0.95 9.64 9.41
6M 7.95 7.70 6.79 6.42 0.94 0.97 9.70 9.39
12M 7.90 7.65 6.22 6.48 0.94 0.97 9.88 9.44
SEK
Spot 9.53 - 7.76 - 0.78 - 11.53 -
3M 9.50 9.48 7.92 7.90 0.78 0.79 11.45 11.42
6M 9.40 9.40 8.03 7.83 0.79 0.79 11.46 11.46
12M 9.35 9.35 7.36 7.92 0.80 0.80 11.69 11.54
DKK
Spot 7.44 - 6.06 - - - 9.01 -
3M 7.45 7.45 6.21 6.21 - - 8.98 8.98
6M 7.45 7.45 6.37 6.21 - - 9.09 9.09
12M 7.45 7.45 5.87 6.31 - - 9.31 9.20
Note: All the exchange rates are quoted in accordance with inter-bank conventions except for the column marked(*) which has GBP as the base currency. The consensus estimates are from a Bloomberg questionnaire on FX
estimates. Please note: The consensus estimates may deviate from estimates based on cross rate calculations.
Source: Bloomberg/Jyske Bank
FX forecasts including consensus
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FX SPOT ONFX Research 24 June 2010 Jyske Markets
Emerging Markets
Against
EUR Consensus USD Consensus DKK Consensus GBP* Consensus
CZK
Spot 25.69 - 20.86 - 0.29 - 31.17 -
3M 25.60 25.45 21.33 21.21 0.29 0.29 30.84 30.66
6M 25.50 25.40 21.79 21.17 0.29 0.29 31.10 30.60
12M 25.50 25.20 20.08 21.36 0.29 0.30 31.88 30.73
PLN
Spot 4.07 - 3.31 - 1.83 - 4.94 -
3M 3.95 3.90 3.29 3.25 1.89 1.91 4.76 4.70
6M 3.90 3.80 3.33 3.17 1.91 1.96 4.76 4.58
12M 3.80 3.78 2.99 3.20 1.96 1.97 4.75 4.61
HUF
Spot 280.56 - 227.9 - 0.27 - 340.49 -3M 280 270 233 225 0.27 0.28 337.35 325
6M 270 266 231 222 0.28 0.28 329.27 320
12M 270 269 213 228 0.28 0.28 337.50 328
TRY
Spot 1.94 - 1.57 - 3.84 - 2.35 -
3M 1.86 1.87 1.55 1.56 4.01 3.98 2.24 2.26
6M 1.76 1.85 1.50 1.54 4.25 4.03 2.14 2.23
12M 1.84 1.84 1.45 1.56 4.05 4.05 2.30 2.24
MXN
Spot 15.59 - 12.66 - 0.48 - 18.92 -
3M 15.30 14.736 12.75 12.28 0.49 0.51 18.43 17.75
6M 14.63 14.568 12.50 12.14 0.51 0.51 17.84 17.55
12M 14.92 14.396 11.75 12.20 0.50 0.52 18.65 17.56
BRL
Spot 2.20 - 1.79 - 3.38 - 2.67 -3M 2.20 2.2 1.83 1.80 3.39 3.45 2.65 2.60
6M 2.11 2.1 1.80 1.79 3.54 3.47 2.57 2.59
12M 2.16 2.1 1.70 1.77 3.45 3.57 2.70 2.55
ZAR
Spot 9.29 - 7.55 - 0.80 - 11.28 -
3M 9.20 9.3 7.67 7.77 0.81 0.80 11.09 11.23
6M 9.10 9.4 7.78 7.80 0.82 0.80 11.10 11.28
12M 9.00 9.3 7.09 7.90 0.83 0.80 11.26 11.37
CNY
Spot 8.39 - 6.81 - 0.89 - 10.18 -
3M 8.04 8.1 6.70 6.75 0.93 0.92 9.69 9.76
6M 7.72 8.0 6.60 6.66 0.96 0.93 9.42 9.63
12M 8.19 7.8 6.45 6.60 0.91 0.96 10.24 9.50
Note: All the exchange rates are quoted in accordance with inter-bank conventions except for the column marked(*) which has GBP as the base currency. The consensus estimates are from a Bloomberg questionnaire on FX
estimates. Please note: The consensus estimates may deviate from estimates based on cross rate calculations.
Source: Bloomberg/Jyske Bank
FX forecasts including consensus
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FX SPOT ONFX Research 24 June 2010 Jyske Markets
Yield outlook government bonds
Central-bank
rate1-year 2-year 5-year* 10-year 30-year
The US
Current 0.25% 0.27% 0.70% 1.95% 3.15% 4.09%
High 0.25% 1.40% 2.10% 3.40% 4.25% 5.25%
Low 0.00% 0.30% 0.75% 2.10% 3.25% 4.00%
The euro zone
Current 1.00% 0.50% 0.57% 1.55% 2.66% 3.37%
High 1.00% 1.40% 1.75% 2.65% 3.75% 4.70%
Low 1.00% 0.40% 0.45% 1.40% 2.50% 3.25%
Denmark
Current 1.05% 0.50% 0.63% 1.20% 2.74% 3.37%
High 1.15% 1.65% 1.95% 2.50% 3.90% 4.70%
Low 1.05% 0.40% 0.50% 1.15% 2.65% 3.25%Note: 4-year yields, Denmark
Source: Bloomberg/Jyske Bank
Commodities forecast average prices
Price 1st
contractQ2 2010 Q3 2010 Q4 2010 Q1 2011
Ave.
2010
Ave.
2011
WTI Crude oil (USD/bl) 78 75 80 85 88 78 90
Brent Crude oil (USD/bl) 78 74 79 84 87 77 89
LME Aluminium (USD/tonne) 1959 2100 2000 2000 2000 - -
LME Copper (USD/tonne) 6610 7500 7700 7700 7900 - -
Source: Bloomberg/Jyske Bank
Economic forecasts
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FX SPOT ONFX Research 24 June 2010 Jyske Markets
Chart 1: EUR/USD
Chart 3: EUR/CHF
Chart 5: EUR/NOK
Chart 7: EUR/CZK
Chart 2: EUR/GBP
Chart 4: EUR/JPY
Chart 6: EUR/SEK
Chart 8: EUR/PLN
1,10
1,20
1,30
1,40
1,50
1,60
1,70
jun 05 jun 06 jun 07 jun 08 jun 09
EUR/USD
1,30
1,35
1,40
1,45
1,50
1,55
1,60
1,65
1,70
jun 05 jun 06 jun 07 jun 08 jun 09
EUR/CHF
7,00
7,50
8,00
8,50
9,00
9,50
10,00
10,50
jun 05 jun 06 jun 07 jun 08 jun 09
EUR/NOK
22
23
24
25
26
27
28
29
30
31
32
33
jun 05 jun 06 jun 07 jun 08 jun 09
EUR/CZK
0,60
0,65
0,70
0,75
0,80
0,85
0,90
0,95
1,00
jun 05 jun 06 jun 07 jun 08 jun 09
EUR/GBP
100
110
120
130
140
150
160
170
180
jun 05 jun 06 jun 07 jun 08 jun 09
EUR/JPY
8,50
9,00
9,50
10,00
10,50
11,00
11,50
12,00
jun 05 jun 06 jun 07 jun 08 jun 09
EUR/SEK
3
3,5
4
4,5
5
5,5
jun 05 jun 06 jun 07 jun 08 jun 09
EUR/PLN
5-year historical FX rates
Source: Reuters EcoWin
Source: Reuters EcoWin
Source: Reuters EcoWin
Source: Reuters EcoWin
Note:Past performance is not a reliable indicator of future performance
Source: Reuters EcoWin
Source: Reuters EcoWin
Source: Reuters EcoWin
Source: Reuters EcoWin
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FX SPOT ONFX Research 24 June 2010 Jyske Markets
Chart 9: EUR/HUF
Chart 11: EUR/MXN
Chart 13: EUR/ZAR
Chart 10: EUR/TRY
Chart 12: EUR/BRL
Chart 14: EUR/CNY
220
240
260
280
300
320
340
jun 05 jun 06 jun 07 jun 08 jun 09
EUR/HUF
10
12
14
16
18
20
jun 05 jun 06 jun 07 jun 08 jun 09
EUR/MXN
6
7
8
9
10
11
12
13
14
15
16
jun 05 jun 06 jun 07 jun 08 jun 09
EUR/ZAR
1,50
1,60
1,70
1,80
1,90
2,00
2,10
2,20
2,30
2,40
jun 05 jun 06 jun 07 jun 08 jun 09
EUR/TRY
2
2,2
2,4
2,6
2,8
3
3,2
3,4
3,6
jun 05 jun 06 jun 07 jun 08 jun 09
EUR/BRL
8
8,5
9
9,5
10
10,5
11
11,5
jun 05 jun 06 jun 07 jun 08 jun 09
EUR/CNY
Source: Reuters EcoWin
Source: Reuters EcoWin
Source: Reuters EcoWin
Source: Reuters EcoWin
Source: Reuters EcoWin
Source: Reuters EcoWin
5-year historical FX rates
Note:Past performance is not a reliable indicator of future performance
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Disclaimer & Disclosure
Jyske Bank is supervised by the Danish Financial Supervisory Authority.
The research report is based on information which Jyske Bank finds reliable, but Jyske Bank does not assume anyresponsibility for the correctness of the material nor any liability for transactions made on the basis of the information
or the estimates of the report. The estimates and recommendations of the research report may be changed without
notice. The report is for the personal use of Jyske Bank's customers and may not be copied.
This is a recommendation and not an investment report.
Conflicts of interest
Jyske Bank has prepared procedures to prevent conflicts of interest. These procedures have been incorporated in the
business procedures covering the research activities of Jyske Markets, a business unit of Jyske Bank.
Jyske Bank's FX, money market and commodity analysts may not hold positions in the instruments for which they
prepare research reports, but Jyske Bank is permitted to hold positions and/or have interests in the instruments for
which such reports are prepared. The analysts receive no payment from persons interested in individual research
reports.
Read more about Jyske Bank's policy on conflicts of interest at www.jyskebank.dk/terms
Risk
FX, money market and/or commodity investment involves risk. Movements in the credit market, the sector and/or the
news flow, etc. regarding the issuer may affect the exchange rate/the interest rate/the price of the commodity. See the
front page of the research report for our view of the risk associated with the currency/interest rate/commodity
investment. The risk factors and/or the sensitivity calculations stated in the report should not be regarded as
exhaustive.
Update of the research report
Analyses, recommendations, and ad hoc publications are not updated. A new publication will instead be published if
and when it is found necessary. Market comments are updated daily.
See the front page for the initial date of publication of the report.
All prices stated are the latest trading prices at the time of the release of the research report, unless otherwise stated.
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