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Weekly FX Insight
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Please note and carefully read the
Important Disclosure on the last part
Weekly FX Insight
Jun 12, 2017
with data as of Jun 9, 2017
Market Review & Focus
FX Analysis
FX & Eco. Figures Forecast
P. 1 - 2
P. 3 - 5
P. 6 - 9
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Citibank (Hong Kong) Limited
Please note and carefully read the Important Disclosure on the last part
Weekly FX Recap
Major Currencies Weekly Performance
LAST WEEK PERFORMANCE
52 w eek 52 w eek 1 year %
high
low
change
Year-ToDate
Change
Weekly changes versus US dollar
USD
Close
Price
97.27
EUR/USD
1.1195
1.1284
1.1166
1.1428
1.0341
-1.1%
6.4%
JPY
USD/JPY
110.32
110.81
109.12
118.66
99.02
3.0%
-5.7%
GBP
GBP/USD
1.2746
1.2978
1.2636
1.5018
1.1841
-11.8%
3.3%
CAD
0.2%
AUD
4.4%
NZD
CCY
USD/CAD
AUD/USD
1.3470
0.7527
USD INDEX
Day High
Day Low
97.50
96.51
103.82
93.02
3.5%
-4.8%
EUR
1.3540
0.7566
1.3423
0.7408
1.3793
0.7778
1.2679
0.7160
5.9%
1.3%
NZD/USD
0.7213
0.7223
0.7114
0.7486
0.6818
1.5%
4.0%
USD/CHF
0.9694
0.9728
0.9614
1.0344
0.9522
0.5%
-4.9%
USD/CNY
6.7980
6.8059
6.7892
6.9649
6.5690
3.5%
-2.3%
USD/CNH
6.7869
6.7945
6.7527
6.9895
6.5783
3.1%
-2.7%
GOLD
1266.63
1298.75
1264.62
1375.45
1121.03
-0.2%
9.9%
Source: Bloomberg L.P., as of Jun 9, 2017
0.58%
-0.74%
0.08%
-1.10%
0.12%
1.13%
0.99%
CHF
-0.65%
CNY
0.10%
CNH
-0.14%
GOLD
-3.00%
-0.98%
-2.00%
-1.00%
0.00%
1.00%
2.00%
Source: Bloomberg L.P., as of Jun 9, 2017
USD
GBP
AUD
• (+) Rising political risk: Former FBI
Director Comey testified before
Congress. Markets think it is not
enough to prove Trump’s obstruction
of justice.
• (-) The Conservative Party setback
in general election: No party won
an absolute majority in the general
election, resulting in a hung
parliament, which may pressure GBP
investment sentiment.
• (+) Australia's data gains: GDP
growth reached 1.7% yoy in Q1,
better than expected, which
supported the AUD.
• (+) Policy divergence: The ECB did
not mention reduction of bond
purchase. USD may be underpinned
on policy divergence amid hope for a
rate hike by the Fed this week.
• (+) USD may strengthen: USD may
be supported as the Fed may hike
rates this week with hawkish policy
statement.
• (-) Property market risk: RICS
property index dropped from 22% to
17%, worse than expected.
• (-) GBP may still have downside
risk: GBP may be restrained in the
short term amid rising political risk
and Brexit uncertainty.
• (+) Less dovish RBA: The RBA kept
the interest rate unchanged last
week with a neutral policy statement,
becoming less dovish.
• (+/-) AUD may range trade:
Australia may release weak job data
next week, which may restrain AUD.
AUD may consolidate in the short
term.
1
Weekly FX Focus:
Please note and carefully read the Important Disclosure on the last part
GBP may be undermined in the short term on a hung parliament
• British PM Theresa May suffered a setback in the UK general
election. The Conservative Party lost its seats from 330 to
318 while the Labour Party increased its seats from 229 to
262.
• GBP may be restrained in the short term amid rising political
risk and Brexit uncertainty.
Brexit outlook
UK general election result
Conservative
Labour
318
• Markets are concerned that Theresa May may finally resign or
be forced by Motion of No Confidence to step down.
Monetary policy
• Rising political uncertainty from the election may cause
negative impact on UK economy in the short term.
• However, in our view, this may not cause the BOE to ease
monetary policy. The central bank may keep the interest rate
unchanged until 2019.
Scottish National Party
35 12
24
• As a Conservative leadership contest may be triggered and
Brexit plan may be revised, negotiations between the UK and
EU may deferred by several months.
• With smooth hard Brexit procedures as our base case, we do
not rule out probabilities of soft Brexit, no deal reached with
the EU and even second Brexit referendum, which may also
undermine GBP.
262
Liberal Democrat
Other Parties
Source: Bloomberg L.P., as of Jun 9, 2017
GBP view
• GBP may be restrained in the short term amid rising political
risk and Brexit uncertainty.
• Technically, GBP/USD dropped below 1.2769-1.2778. The
pair may test lower to 1.2615 (Mar top). If the pair further
deteriorates, GBP may test lower to 1.2351 (Apr low).
2
GBP/USD
GBP/USD may test lower to 1.2615(9.84)
Please note and carefully read the
Important Disclosure on the last part
The brackets are the exchange rates in terms of Hong Kong dollar, with HKD $7.7972 exchange rate for reference
Last Price
Last wk
High
Last wk
Low
2nd
Support
1st
Support
1.2746
(9.94)
1.2978
(10.12)
1.2636
(9.85)
1.2351
(9.63)
1.2615
(9.84)
1st
2nd
Resistance Resistance
0-3
month
6-12
month
1.33
(10.37)
1.26
(9.82)
Upcoming economic data
Jun 15: Retail Sales
1.3048
(10.17)
1.3279
(10.35)
Outlook:
(-) Rising political risk: Negotiations between
the UK and EU may be deferred for several
months. GBP may be restrained in the short
term amid rising political risk and Brexit
uncertainty.
1.2615 (Mar top)
(+) Cooling Scottish issue: The SNP, which
supports Scottish independence, lost its
seats from 54 to 35, reducing the odd of
Scottish independence
1.2351 (Apr low)
Technical Analysis:


GBP/USD dropped below 1.2769-1.2778.
The pair may test lower to 1.2615.
If the pair further deteriorates, GBP may
test lower to 1.2351 (Apr low).
Source: Bloomberg L.P., as of Jun 9, 2017
3
Please note and carefully read the Important Disclosure on the last part
The brackets are the exchange rates in terms of Hong Kong
dollar, with HKD $7.7972 exchange rate for reference
AUD/USD
Last Price
0.7527
(5.87)
Last wk
High
Last wk
Low
2nd
Support
1st
Support
1st
Resistance
2nd
Resistance
0.7566 0.7408 0.7324 0.7373 0.7556 0.7592
(5.90) (5.78) (5.71) (5.75) (5.89) (5.92)
0-3m
6-12m
0.74
(5.77)
0.72
(5.61)
AUD may range trade amid possible weak job data
Weekly recap: AUD was supported as the RBA kept the interest
rate unchanged last week with a neutral policy statement,
becoming less dovish.
Outlook analysis: In our view, job growth in Mar and Apr is lower
than the trend level. Thus, job may reduce 7500 in May while
unemployment rate may stay at 5.7%. AUD upside may be limited
and AUD/USD may consolidate in the short term.
Technical analysis: Since the RSI has reached overbought levels,
upside may be limited to 0.7556-0.7592. The pair may range trade
between 0.7373-0.7592(5.70-5.87).
0.7556-0.7592 (May, Apr 24 tops)
0.7373 (Jun low)
Source: Bloomberg L.P., as of Jun 9, 2017
NZD/USD
Last Price
0.7213
(5.62)
Last wk
High
Last wk
Low
2nd
Support
1st
Support
1st
Resistance
2nd
Resistance
0.7223 0.7114 0.6950 0.7031 0.7244 0.7376
(5.63) (5.55) (5.42) (5.48) (5.65) (5.75)
0-3m
6-12m
0.70
(5.46)
0.68
(5.30)
NZD adjustment may present buy-on-dip opportunities amid
possible accelerated economic growth
Weekly recap: High-yield NZD was supported as market risk
cooled down on rising global equity.
Outlook analysis: We expect NZ economy may grow 0.8% in Q1
with yearly growth reaching 2.8%. This may show NZ economy to
outperform other major countries. Possible NZD adjustment may
present buy-on-dip opportunities.
Technical analysis: Since the RSI rose to overbought levels,
upside may be limited. The pair may range trade between 0.70370.7244(5.41-5.58) in the short term
0.7244(fibo 0.236)
0.7031(fibo 0.618)
Source: Bloomberg L.P., as of Jun 9, 2017
4
Please note and carefully read the Important Disclosure on the last part
Weekly FX Strategies
1.
Bearish – GBP
• GBP may be restrained in the short term amid rising political risk and Brexit
uncertainty
• GBP/USD may test lower to 1.2615 (9.84)
2.
Neutral – AUD
• Australia may release weak job data next week, which may restrain AUD.
• AUD/USD may range trade between 0.7373-0.7592(5.75-5.92)
3.
Neutral - NZD
• NZD may be restrained as USD may rebound as the FOMC may hike rates this week
• NZD/USD may range trade between 0.7031-0.7244 (5.48-5.65)
5
Please note and carefully read the Important Disclosure on the last part
Source: Bloomberg L.P., as of Jun 9, 2017
Other FX strategies
The brackets are the exchange rates in terms of Hong Kong
dollar, with HKD $7.7972 exchange rate for reference
EUR/USD: ECB accommodative policy may restrain EUR
USD/CAD: Oil price consolidation may restrain CAD in the short term
Last Price
Last wk
High
Last wk
Low
2nd
Support
1st
Support
1st
Resist.
2nd
Resist.
0-3M
6-12M
Last Price
Last wk
High
Last wk
Low
2nd
Support
1st
Support
1st
Resist.
2nd
Resist.
0-3M
6-12M
1.1195
(8.73)
1.1284
(8.80)
1.1166
(8.71)
1.0979
(8.56)
1.1129
(8.68)
1.1315
(8.82)
1.1428
(8.91)
1.13
(8.81)
1.07
(8.34)
1.347
(5.79)
1.354
(5.76)
1.3423
(5.81)
1.3284
(5.87)
1.3381
(5.83)
1.3599
(5.73)
1.3669
(5.70)
1.35
(5.78)
1.38
(5.65)
(-) ECB policy risk: We expect the ECB to extend its policy easing to 2018 or
even to expand QE, which may restrain EUR.
(-) Medium and long term performance driven by US factor: In the medium
and long term, EUR may be driven by when Trump's government implements tax
reform and increase fiscal expenditure. If everything is smooth, USD may be
underpinned again, which may restrain EUR.
(+) Short-term factor: The OPEC reached an agreement to extend production
cut deal yesterday. However, oil price plunged on profit taking. Since Canada
mainly exports oil products, short-term pressure in oil prices may restrain CAD.
(-) Longer term factor: The BOC turned hawkish. We expect the BOC not to
hike rates until 1Q18, which may support CAD at lows.
1.1315-1.1428 (fibo 0.236, Feb 2016 top)
1.3599 (fibo 0.764)
1.0979 (fibo 0.50)
1.3284-1.3381(fibo 0.382, fibo 0.50)
USD/JPY: Accommodative policy may undermine JPY in the
medium term
USD/CNH: CNH may remain stabilized
Last Price
Last wk
High
Last wk
Low
2nd
Support
1st
Support
1st
Resist.
2nd
Resist.
0-3M
6-12M
110.32
(70.68)
110.81
(70.37)
109.12
(71.46)
108.13
(72.11)
109.78
(71.03)
114.37
(68.18)
115.51
(67.50)
110
(70.88)
118
(66.08)
(-) Falling US treasury yields: US treasury yields fell amid concern that US tax
reform may be deferred, which may pressure USD/JPY in the short term.
(+) JPY may weaken in the medium and long term: Japan's inflation may not be
able to reach the BOJ's target of 2% in the foreseeable future. The BOJ may need
to expand its balance sheet in the coming years, which may undermine JPY.
114.37 (May top)
Last Price
Last wk High
Last wk Low
2nd Support
1st Support
1st Resist.
2nd Resist.
6.7869
(1.1489)
6.7945
(1.1476)
6.7527
(1.1547)
6.7028
(1.1633)
6.7169
(1.1608)
6.8374
(1.1404)
6.8608
(1.1365)
(-/+) CNH may stabilize gradually: Over the last few months, the Chinese
government tightens its supervision on financial industry for deleveraging,
tightening financial conditions. As rising interest rate may affect corporation
investment decisions and economic growth may be dragged in Q2. Thus, we
expect USD/CNY may rebound to 6.88 gradually for the coming 0-3 months.
6.8374 (May 31 top)
6.7169 (fibo 0.50)
108.13 (Apr low)
6
Please note and carefully read the Important Disclosure on the last part
Upcoming Economic Figures and Events
FOMC policy decision may become market focus
US
FOMC Policy Decision
 We expect a hawkish policy statement. For example, it may not mention recent
weak inflation and cut the unemployment rate forecast further or even release
details of balance sheet reduction. We keep our expectation that the Fed may hike
rates in Jun and Sep and announce balance sheet reduction in Dec.
May Job Data
Australia
We expect job growth in Mar and Apr is lower than the trend level. Thus, job may
reduce 7500 in May while unemployment rate may stay at 5.7%.
Q1 GDP
New
Zealand
We expect NZ economy may grow 0.8% in Q1 with yearly growth reaching 2.8%.
This may show NZ economy to outperform other major countries.
BOJ Policy Decision
Japan
We expect the BOJ to keep the interest rate and QE unchanged with a similar
policy statement.
June 15 (Thursday):
FOMC Policy Decision
Jun 15 (Thursday):
Employment Change
Citi Forecast Previous
-7500
37000
Jun 15 (Thursday):
GDP
Citi Forecast Previous
0.8%
0.4%
June 16 (Friday):
BOJ Policy Decision
7
Please note and carefully read the Important Disclosure on the last part
Appendix 1:
Citi interest rate and FX Forecast for 2017
Citi FX Outlook Forecast
Dollar Index
EUR/USD
GBP/USD
USD/JPY
USD/CHF
AUD/USD
NZD/USD
USD/CAD
USD/CNY
0-3 month
96.25
1.13
1.33
110
0.97
0.74
0.70
1.35
6.88
Source: Citi, forecast as of May 19, 2017
6-12 month
101.28
1.07
1.26
118
1.00
0.72
0.68
1.38
7.03
Citi FX interest rate Forecast
6/9/17
1.00
0.00
0.25
-0.10
-0.75
1.50
1.75
0.50
3.50
2Q ’17
1.25
0.00
0.25
-0.10
-0.75
1.50
1.75
0.50
3.50.50
Rate cut
expectations
3Q ’17
1.50
0.00
0.25
-0.10
-0.75
1.50
1.75
0.50
3.70
4Q ’17
1.50
0.00
0.25
-0.10
-0.75
1.50
1.75
0.50
3.70
Rate hike
expectations
AUD
AUD may be driven by iron ore price and overall performance of Asia currencies. The currency looks close to fair
value. For the coming 0-3 months, AUD may hover around 0.74.
EUR
With improved Euro Area's data and rising US political risk, EUR may gain in the short term. For the coming 0-3
months, EUR may rise to 1.13.
GBP
The Conservative Party may win in the general election, which may smooth Brexit process and underpin GBP. For
the coming 0-3 months, GBP may rise to 1.33.
JPY
US treasury yields fell amid concern that US tax reform may be deferred, which may pressure USD/JPY in the
short term. For the coming 0-3 months, USD/JPY may drop to 110.
8
Please note and carefully read the Important Disclosure on the last part
Appendix 2:
Last week’s Economic Figures
Time
Importance
06/05/17 16:30
06/05/17 22:00
06/05/17 22:00
06/05/17 22:00
UK
US
US
US
!
!!
!!
!!
06/06/17 22:00
CA
!
06/07/17 09:30
AU
!!
06/08/17 07:01
06/08/17 07:50
06/08/17 09:30
06/08/17 19:45
06/08/17 20:15
06/08/17 20:30
06/08/17
06/08/17
06/08/17
UK
JN
AU
EC
CA
US
CH
CH
CH
!!
!!
!!
!!!
!
!!
!!
!!
!!
06/09/17 09:30
06/09/17 16:30
06/09/17 16:30
06/09/17 16:30
06/09/17 20:30
06/09/17 20:30
CH
UK
UK
UK
CA
CA
!!
!!
!!
!!
!!
!!
Source: Bloomberg L.P.
Event
Tuesday
Markit/CIPS UK Services PMI
ISM Non-Manf. Composite
Durable Goods Orders
Durables Ex Transportation
Tuesday
Ivey Purchasing Managers Index SA
Wednesday
GDP YoY
Thursday
Period
Actual
Survey
Prior
May
May
Apr
Apr
53.8
56.9
-0.80%
-0.50%
55
57.1
-0.60%
-0.20%
55.8
57.5
-0.70%
-0.40%
May
53.8
--
62.4
1Q
1.70%
1.80%
2.40%
RICS House Price Balance
May
1Q
Apr
Jun
May
Jun
May
May
May
17%
1.00%
A$555m
0.00%
194.7k
245k
14.80%
8.70%
$40.81b
20%
2.40%
A$2000m
0.00%
202.0k
240k
8.30%
7.20%
$47.80b
22%
2.20%
A$3169m
0.00%
213.5k
255k
11.90%
8.00%
$38.05b
May
Apr
Apr
Apr
May
May
1.50%
-0.80%
0.00%
-£10383
54.5k
6.60%
1.50%
-0.3%
0.70%
-£12000
15.0k
6.60%
1.20%
1.40%
2.20%
-£12048
3.2k
6.50%
GDP Annualized SA QoQ
Trade Balance
ECB Main Refinancing Rate
Housing Starts
Initial Jobless Claims
Imports YoY
Exports YoY
Trade Balance
Friday
CPI YoY
Industrial Production YoY
Manufacturing Production YoY
Visible Trade Balance GBP/Mn
Net Change in Employment
Unemployment Rate
9
Please note and carefully read the Important Disclosure on the last part
Appendix 3:
Upcoming Economic Figures (Jun 12, 2017 – Jun 16, 2017)
Time
Importance
6/13/2017 16:30
UK
!!
6/14/2017 8:30
6/14/2017 10:00
6/14/2017 10:00
6/14/2017 16:30
6/14/2017 16:30
6/14/2017 20:30
6/14/2017 20:30
6/14/2017 20:30
6/14/2017 20:30
AU
CH
CH
UK
UK
US
US
US
US
!
!!
!!
!!
!!
!!
!!
!!
!!
6/15/2017 2:00
6/15/2017 6:45
6/15/2017 9:30
6/15/2017 9:30
6/15/2017 16:30
6/15/2017 16:30
6/15/2017 19:00
6/15/2017 20:30
US
NZ
AU
AU
UK
UK
UK
US
!!!
!!
!!
!!
!!
!!
!!!
!!
6/16/2017 17:00
6/16/2017 20:30
6/16/2017 20:30
6/16/2017 22:00
6/16/2017
EC
US
US
US
JN
!!
!
!
!!
!!
Source: Bloomberg L.P.
Event
Tuesday
CPI YoY
Wednesday
Westpac Consumer Conf SA MoM
Retail Sales YoY
Industrial Production YoY
Average Weekly Earnings 3M/YoY
ILO Unemployment Rate 3Mths
CPI YoY
CPI Ex Food and Energy YoY
Retail Sales Advance MoM
Retail Sales Ex Auto MoM
Thursday
Period
Actual
Survey
Prior
May
--
2.70%
2.70%
Jun
May
May
Apr
Apr
May
May
May
May
----------
-10.70%
-1.10%
10.70%
6.50%
2.40%
4.60%
2.20%
1.90%
0.40%
0.30%
FOMC Rate Decision (Upper Bound)
Jun
1Q
May
May
May
May
Jun
Jun
---------
1.25%
--
1.00%
2.70%
37.4k
5.70%
4.50%
4.00%
0.25%
245k
May
May
May
Jun
Jun
------
1.40%
4.30%
1.80%
97.1
-0.10%
1.90%
-2.60%
-2.50%
97.1
-0.10%
GDP YoY
Employment Change
Unemployment Rate
Retail Sales Ex Auto Fuel YoY
Retail Sales Inc Auto Fuel YoY
Bank of England Bank Rate
Initial Jobless Claims
Friday
CPI YoY
Housing Starts MoM
Building Permits MoM
U. of Mich. Sentiment
BOJ Policy Balance Rate
6.40%
2.40%
4.60%
2.00%
1.90%
0.10%
0.20%
2.70%
10.0k
5.70%
1.90%
1.70%
0.25%
10
Important Disclosure
“Citi analysts” refers to investment professionals within Citi Research (CR) and Citi Global Markets (CGM) and voting
members of the Global Investment Committee of Global Wealth Management.
Citibank N.A. and its affiliates / subsidiaries provide no independent research or analysis in the substance or preparation of
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In any event, past performance is no guarantee of future results, and future results may not meet our expectations due to a
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11
Important Disclosure
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its affiliates do not guarantee its accuracy or completeness and accept no liability for any direct or consequential losses
arising from its use. Opinions expressed herein may differ from the opinions expressed by other businesses or affiliates of
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are subject to change based on market and other conditions. The information contained herein is also not intended to be
an exhaustive discussion of the strategies or concepts.
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to clients.
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For an accurate record of your accounts and transactions, please consult your official statement.
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https://www.citivelocity.com/cvr/eppublic/citi_research_disclosures , which contains the important disclosures regarding
companies covered by Citi's Equity Research analysts, and please refer to the attached link:
https://ir.citi.com/PuXs6xELNHAu7UqkjgvWxnihtUeLtAtDxeEh%2B2qaPpPb7uukpx8Qw1vzcuidtMtqgn1BWqJqak8%3D
for details on the Citi Research ratings system.
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Important Disclosure
Unrated or non investment grade Debt Securities typically offer a higher yield than investment grade Debt Securities, but
also present greater risks with respect to liquidity, volatility, and non-payment of principal and interest. As a result of being
classified as non investment grade Debt Securities, these Debt Securities present a greater degree of credit risk relative to
many other fixed income Debt Securities.
Higher Credit Risk – Unrated or non investment grade Debt Securities generally have predominantly speculative
characteristics with respect to the issuer’s capacity to pay interest and repay principal. There is greater risk of non-payment
of interest and loss of principal. Many issuers of these Debt Securities have experienced substantial difficulties in servicing
their debt obligations, which has led to default and restructurings. The issuers of these Debt Securities generally have to
pay a higher rate of interest than investment grade Debt Securities.
Higher Liquidity and Secondary Market Risk – The markets in which unrated or non investment grade Debt Securities are
traded are generally more limited than those in which investment grade Debt Securities are traded. This lack of liquidity
may make it more difficult to resell these Debt Securities and obtain market quotations.
Downgrade Risk – Downgrades in the credit rating of unrated or non investment grade Debt Securities by rating agencies
are generally accompanied by declines in the market value of these Debt Securities. In some circumstances, investors in
the unrated or non investment grade Debt Securities market may anticipate such downgrades as a result of these credits
being placed on “credit watch” by rating agencies, causing volatility and speculation of further credit deterioration.
Higher Vulnerability to economic cycles - During economic downturns, unrated or non investment grade Debt Securities are
typically more susceptible to price volatility and fall more in value than investment grade Debt Securities as i) investors may
reevaluate holdings in lower-quality bonds in favor of investment-grade corporate Debt Securities; ii) investors become
more risk averse; and iii) default risk rises. This is often referred to a “flight to quality”.
Event Risk – This includes any of a variety of events that can adversely affect the issuer of unrated or non investment
grade Debt Securities, and therefore the issuer’s ability to meet debt service obligations to repay principal and interest to
Debt Securities holders. Event risk may pertain to the issuer specifically, the industry or business sector of the issuer, or
generally upon the overall economy. It could have a direct or indirect impact on the issuer and their outstanding debts.
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Important Disclosure
Risk relating to RMB – If you choose RMB as the base currency or the alternate currency, you should also note the
following:
RMB is currently not freely convertible through banks in Hong Kong. Due to exchange controls and/or restrictions imposed
on the convertibility, utilisation or transferability of RMB (if any) which in turn is affected by, amongst other things, the PRC
government's control, there is no guarantee that disruption in the transferability, convertibility or liquidity of RMB will not
occur. There is thus a likelihood that you may not be able to convert RMB received into other freely convertible currencies.
CNH exchange rates and CNY exchange rates are currently quoted in different markets with different exchange rates,
whereby their exchange rate movements may not be in the same direction or magnitude. Therefore, the CNH exchange
rate may be different from the CNY exchange rate.
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