EFTA01459739.pdf

Real Assets: Commodities — Volatility within the oil market continues. Last 250.000 No. positions week, crude oil bounced off of its lowest level ($28.35/barreff since 2003 and moved above the key psychological 530/barrel barrier. A report that 200.000 Russia was ready to negotiate with OPEC to cut production helped support prices. 150,000 — However, as optimism on Russia's actions faded, crude oil posted its worst two-day decline 100.000 (-11.1%) since March 2009 (Monday & Tuesday). — With NYMEX crude oil shorts remaining near a 50.000 record high, financial positioning will continue to foster volatility in the oil markets in the near term as any news may drive sharp price moves. 0 2014 2011 2012 2013 2015 2018 — However, as prices remain depressed, we do not Figure 3: NYMEX Crude Oil Shorts believe that the current output level of U.S. Source. FactSet. Deutsche Bank Wealth Management. producers is sustainable over the long term. As Data as of January 29. 2016. of January 29, U.S. production has fallen only 4% since its record high in June 2015 while rig counts have fallen over 60% since their peak. Focus of the week — Given unsustainable production levels, we Commodities: As crude oil shorts remain near believe that oil production will begin to come record highs, volatility in the oil market will offline. As it does, we believe that crude prices continue. will rise to 550/barrel by year-end 2016. Global FX: Diverging monetary policy will Global FX continue to be a tailwind for USD strength in — As U.S. economic data has been weaker than 2016. expected and the Citigroup Economic Surprise Index has fallen to an eight month low, the 1.22 futures market has shifted and is not pricing in an 1.20 additional Fed rate hike until 2017 at the earliest. As a result, the Dollar Index is on pace to post its 1.18 worst week since May 2009. 1.16 — We believe that this move in the USD is 1.14 overdone and given the strong labor market and 1.12 expectation for a moderate rise in growth and 1.10 inflation, there is still justification for the Fed to continue raising rates this year (our estimate is 1.08 two rate hikes). 1 06 — In addition, the BoJ's decision to adopt a 4, 4, 41 negative interest rate policy and the likelihood of 1°4 1, 4, 4, 4, 4, 43 45 additional policy measures by the ECB in the Ai" Ni l 1 1 el di +dr 41 1 eV coming months should support the USD as the policy divergence continues. Figure 4: EUR/USD Trading Range Source: FactSet, Deutsche Bank Wealth Management. — We expect the USD to strength to .95 against the Data as of February 3. 2016. EUR and 125 against the JPY by year-end 2016. No assurance can be given that any forecast or target can be achieved. Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to Deutsche Bank be incorrect. Past performance Is not indicative of future returns. Investments come with 4 Wealth Management risk. The value of an investment can fall as well as rise and you might not get back the February 5, 2016 [amount originally invested at any point In time. Your capital may be at risk. CONFIDENTIAL - PURSUANT TO FED. R. GRIM. P. 6(e) DB-SDNY-0 20391 CONFIDENTIAL SDNY_GM_00266575 EFTA01459739