EFTA01459704.pdf

12 January 2016 FX Blueprint: Forever Young the December Monetary Policy Report, which should Similarly, Norges Bank haven't that much incentive to more than cushion the additional decline in oil. Growth over-deliver on easing given currency weakness and employment data continues to be soft, but there is little evidence of more deterioration. Finally, CPI tracks —Norway CFM. yoy exchange rate developments closely and reaccelerated 6 Nine month change in 444 NOKTWI. rhs 25% above target in November (Figure 4). While Norges has 5 20% been relatively sanguine about high inflation due to weak wage developments, CPI is now above forecast 4 15% and a further increase could weigh on consumption. 10% 3 5% Don't givi; up on Swiss 2 At times last year it felt as if the SNB had just swapped 0% one currency peg for another. There are grounds for .5% optimism, however, that the weakening trend in the 0 .10% franc will resume. .1 -15% First, the SNB may be reluctant to cut rates further, but -2 -20% premature tightening is also unlikely. Growth and Sep-01 Sep-02 Sep-07 Sep-10 Sep-13 inflation have disappointed this year and forward Source Onnw dent 111oarten A'wa LP indicators like the KOF have weakened again. The export sector in particular continues to suffer, with Switzerland's trade balance improvement is being autumn trade data showing further deterioration across goods and services. The improvement in the trade driven by import compression balance is misleading, therefore, having been driven by — — Svalzerland. rnpons. % GDP import compression. Second, the basic balance may Switzerland exports. % GDP 19% - —Switzerland trade balance, % GDP, rhs finally be turning, recording the largest four quarter deficit since 2009 in Q3. This was driven by large direct 17% investment outflows; although portfolio flows were light, they have recorded three quarters of net outflows. 16% Third, positioning looks light, with the IMM report 13 showing speculators net long francs. Our CORAX report suggests that corporates have been heavily 11% buying CHF into the end of last year, (Figure 7) perhaps related to an adjustment in hedging ratios ahead of 9% ECB easing. As this flow dissipates, it should weigh 7% less on the EUR/CHF cross. Combine longs there with -1% CHFUPY shorts on valuation grounds as well as its low 5% .1% beta to risk sentiment. Jan-08 Apt-09 Jul-10 Oct-11 Jan-13 Apr-14 JS-15 Sates patine.Or* laketobat Oliver Harvey, London, +44 OW 754 51947 Corporates have been heavily buying CHF Swiss outflows rotating into direct investment MNb ererateren toltletly, • GOP 6% 0.9 aeat/ect•mtvt.r.: 4410.0e. • cor CORAX Corporates CHF (12 month) ervire I<COV4. 0.0<<Cit. • 0LP '0% oaf a.: botirc• EURCHE (rhs.inverted) 1% • 1.d 4% 1.6 10 11 12 13 IS 15 16 Sane. Onsire on Sawa On &vs, th.oto/c0 Page 18 Deutsche Bank AG/London CONFIDENTIAL — PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0120338 CONFIDENTIAL SDNY_GM_00266522 EFTA01459704