EFTA01459730.pdf

5 February 2016 Focus Europe: Dark clouds. no storm yet Central Banks & Financial Forecasts Euro Area inanctal Forecasts Euro Area LatOtil Mit Jun IC out.; to We expect a 10bp deposit rate cut in March. Unless data surprise to the upside, Reg rate 0.06 0.05 0.06 0.05 a temporary acceleration in QE seems likely. If data surprise to the downside, this might not even be a front-loading but an increase in the QE envelope. The 3m Euribor 0.17 -0.20 -0.25 .0.15 ECB also has an opportunity to think about a negative rate shield. I0Y govt bond 0.25 0.50 0.70 1.05 EUR/USD 1.12 1.05 1.02 0.95 UK UK Bank Rate 0.50 0.50 0.50 0.75 We recently updated our call. Our view of liftoff in May 2016 was becoming difficult to justify with inflation rising slowly, wages disappointing, growth 3m Libor 0.59 0.61 0.62 0.91 slower and financial markets fragile. We now see the first hike in November. I0Y govt bond 1.57 1.70 1.80 2.10 G8P/USD 1.46 1.46 1.40 1.28 Switzerland EUR/GBP 0.77 0.72 0.73 0.74 Switzerland The SNB left policy on hold at its last meeting with rates well below zero. We 3m Libor Tgt 0.75 -0.75 -0.75 -0.75 see further gradual depreciation of CHF vs. EUR going forward. EUR/CHF 1.12 1.08 1.10 1.12 Sweden Sweden Repo rate -0.35 -0.35 -0.35 -0.35 In December, the Riksbank left its rates profile broadly unchanged, suggesting EUFUSEK 9.45 9.10 8.90 8.75 rates will remain sub-zero until end-2017. Norway Daposil rate 0.75 0.75 0.60 0.50 Norway EUWN0K 9.54 9.58 9.57 9.21 Denmark Norges Bank surprised with a rate cut in September. We expect a final further 25bp rate cut this quarter. Lending rate 0.05 0.05 0.05 0.05 EUWDKK 7.46 7.46 7.46 7.46 Denmark Poland 2Ny repo Mkt 1.50 1.50 1.50 1.50 Denmark was forced to cut its deposit rate four times last year, 10bp of which EUR/PLN 4.43 4.43 4.37 4.25 was reversed in January (to -0.65%). We expect the DKK ERMII peg to hold. Hungary Base rate 1.35 1.35 1.35 1.35 Po EUFVHUF 310.5 316.3 317.5 320.0 Czech Rep. The NBP cut by 50bps at the March meeting and signaled the easing cycle had Repo rate 0.05 0.05 0.05 0.05 ended. We see rates on hold for the coming quarters with the longer-term outlook complicated by the appointment of a new MPC in early 2016. EUR/CIK 27.0 27.1 27.1 26.0 Morno Hungary Japan 0/N Call Rate .0.10 -0.05 -0.05 -0.15 The NBH signaled that the easing cycle is now over and that the policy rate 3m Tibor 0.15 0.16 0.15 0.15 will remain at the current level for a very long time. We do not expect any rate I0Y govt bond 0.60 0.20 0.20 0.20 hikes before 2017. USD/JPY 118 123 125 128 US Czech Republic Fed Funds Elt 0.375 0.625 0.875 1.125 The CNB recently confirmed it had intervened to defend the 27/EUR floor. With 3m Libor 0.62 0.83 1.08 1.33 sterilization costs minimal and intervention probably modest, we expect the TOY govt bond 1.82 2.00 2.25 1.75 floor is here to stay for the coming quarters. sans DO, abeerdip *SW LP, Nainl Cent Matt Deutsche Bank AG/London Page 23 CONFIDENTIAL — PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0120379 CONFIDENTIAL SDNY_GM_00266563 EFTA01459730