Foreign Exchange

London 08:00

FX Daily Strategist: Europe

Bernanke confirms wait-and-see policy; markets to revert to 'weak US data means weak USD' theme US debt ceiling: shift towards fallback proposal Eurozone stress tests in focus, failure to schedule Summit says no agreement in sight: EUR headed lower The past 24 hours have seen little progress on the two most pressing concerns for financial markets. S&P have signalled their disapproval by putting the US on CreditWatch negative. A suggestion that US debt ceiling negotiations might continue over the weekend at Camp David seems unlikely to go ahead given the lack of support from both Republican and Democrat House Leaders. In this context, the White House announcement that agreement has been reached on USD1.5tr of spending cuts probably implies that agreement on further cuts may be at an impasse. Focus is shifting to a fallback proposal from Senate Republican leader McConnell that would allow Obama to raise the debt ceiling unilaterally at regular intervals - but at the political cost of appearing fiscally irresponsible in an election year. The lower chances of a second HIA in conjunction with this fallback plan Source: Reuters, BNPP. The Chart plots gold (in means that it likely represents the most USD-negative outcome. USD terms) leading CHFUSD by about two Fed Chairman Bernanke has used the second day of his semiweeks. Despite a big divide in the interim annual testimony to balance things out a bit, re-iterating our between QE1 and QE2 (see red box) there has contention late Wednesday that while further easing remains been a relationship between the two. The wedge possible pending a renewed economic deterioration, the core of formation on gold mid-June was concerning and the committee remains in wait-and-see mode. Thus it is likely that the potential for a break down (moving to a postwe revert to the familiar dynamic where weaker US employment QE2 unknown territory) suggested that USDCHF and inflation data leads the USD weaker as expectations of could be posed for a meaningful retracement. QE3 build - and vice versa. As Bernanke noted, inflation is now However, all it took was the FOMC minutes higher than late last year. Today's core CPI release thus takes on highlighting a debate on QE3 amongst members added significance; we match consensus in seeing the uptrend in to reinvigorate prior trends. However, we wonder core CPI continuing up to 1.6% y/y. if this will be a one-way bet with Bernanke having On Europe, the publication of the EU stress tests will be watched. reinforced the two-way nature of the debate. While press reports suggest that up to 15 of the 91 banks are GMT Country Release Mkt Last likely to fail, the real reaction may have to wait until bank analysts 08:00 IT (May) EU Trade Balanc bn EUR -0.7 crunch the numbers over the weekend to determine the credibility Foreign Trade B 09:00 EU (May) -3.2 -4.1 or otherwise of the tests; and to calculate the relative scores of bn EUR (nsa) those instituitions taking part. Also of interest will be the plans of 12:30 US (Jun) CPI % (m/m) -0.1 0.2 national regulators to recapitalise those failing institutions. 12:30 US (Jul) Empire State 5.0 -7.8 Meanwhile there has been no further news of an emergency 12:30 US (Jun) Core CPI % (y/y) 1.6 1.5 Core CPI % summit of EU leaders; and although there are still hopes that one 12:30 US (Jun) 0.2 0.3 (m/m) might be called sooner rather than later, certainly Germany 12:30 US (Jun) CPI % (y/y) 3.6 3.6 appears in no rush. The approach still seems to be focused on Industrial Prod % Greece, and with Greece fully funded till September, the 13:15 US (Jun) 0.3 0.1 (m/m) conclusion is that there is no need for haste. But this appears a 13:15 US (Jun) Capacity Utilis % 76.9 76.7 dangerous game: while the passage of the Italian budget may 13:55 US (Jul) Michigan Sentim 72.0 71.8 well ease concerns in the short term, the risks of a further slide in confidence over the next couple of months are patent. Lasting uncertainty means that EUR continues to remain vulnerable in our eyes. Certainly EURCHF as a leading indicator of EUR sentiment continues to remain depressed; we continue to favour a lower EUR. AUD has fallen as an Australian bank called for more significant rate cuts from the RBA over the next 12 months, but we are more optimistic. The travails of the globe's two most important currencies mean that investors are increasingly running out of places to park their cash. We continue to see inflows into Asian and commodity currencies as reserve managers diversify into more fiscally responsible states; we expect that dips in the AUD are likely to remain shallow as it remains supported by the sovereign bid and by mining investment inflows. See today's Market Focus for more. This is not classified as objective research. Please refer to important information at the end of the report.

CHF/USD Vs. XAU/USD

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MARKET: Comments from Fed Chairman Bernanke suggesting a shelving of any possible QE3 led to pressure on risk ahead of today's much awaited US June CPI release, while concerns over an agreement to raise the debt ceiling continue. EURUSD opened at $1.4142 jumping to $1.4199 as S&P followed up yesterday's warning placing the US on "credit negative watch" with a potential to downgrade within 90 days if a debt ceiling deal wasn't agreed. Large offers at $1.4200 prompted a return to $1.4150 before trading a $.4160/90 range. USDJPY eased back from early highs of Y79.25 to Y78.90 before option related and monthly importer demand into the Tokyo fix returned the pair to Y79.10. AUDUSD opened in Asia at $1.0725 after easing in NY from $1.0787 highs following Fed Bernanke's comments that doused any imminent hopes of QE3, leading to riskoff and a fall in the commodity and equity markets. AUDUSD hit early lows of $1.0717 before moving higher in controlled fashion to a peak of $1.0747 following S&P's decision to put the US on a negative credit watch in the event a deal isn't struck on the US debt ceiling. AUDNZD was also quiet trading NZ$1.2713-57, with NZDUSD choked into a $0.8412-48 range. Aussie-yen traded Y84.69-85.08. (MNI). Asian equities mixed at best, though Japan and China continue to hold modest gains. IN US overnight, the S&P 500 closed 0.67% lower despite better earnings reports from JPM and Google. Losses were broad based across sectors. Data/ Events in the day ahead European Banking Authority publishes results of bank stress tests (16:00 GMT), which will be a key focus going into the weekend. European data starts at 0600GMT with ACEA new car registrations data for June, which is followed by the BoF retail survey at 0630GMT and France trade data at 0645GMT. The EMU May trade balance is due at 0900GMT and is expected to reduce to a seasonallyadjusted -E2.8 billion. US data starts at 1230GMT with CPI and the NY Fed Empire State Survey. Consumer prices are expected to fall 0.2% in June after rising more than expected in May. Core prices are seen to increase 0.2%. AAA reported that gasoline prices retreated modestly in June after rising for eight months in a row. The NY Fed Empire State Index is forecast to increase to a reading of 7.0 in July after falling into negative territory in June. At 1315GMT, industrial production is expected to increase 0.3% in June after modest readings in the last two months. US data continues at 1355GMT, when the preliminary Michigan Sentiment Index is expected to fall to 71.0 after falling to 71.8 in June. NEWS EUROPE: Foreign Exchange Strategy Friday, 15 July 2011 http://www.GlobalMarkets.bnpparibas.com

Results of EU bank stress tests will be published today, July 15 at 1600 GMT, followed by a news conference at 1630 GMT. (Reuters) More ahead of stress tests: EBA says Germanys Helaba did not comply with test standards. Spain's Pastor, Catalunya fail, blames strict test rules. Up to 15 banks seen failing test - investors, analysts. (Reuters) German FinMin Schaeuble: Eurobonds are not a solution, Italy cannot be compared with Greece as it is in a decent state, Eurozone debt problems cannot be solved overnight, Europe must ensure Greece can finance its debt, Greek crisis is now endangering Euro as a whole. (Reuters) Moodys Investors Service yesterday lowered the ratings on Irish government-backed debt issues by five lenders, including Bank of Ireland Plc, following its downgrade of the state to non-investment grade this week. IMF Deputy Director Ajai Chopra said Ireland has a good chance of returning to markets if European leaders are able to stem contagion from the regions debt crisis. Italy's austerity budget passed its first parliamentary hurdle on Thursday but the opposition says Prime Minister Silvio Berlusconi's government is in a shambles and should resign after it is finally approved. The fouryear package, which has been increased to 48 billion euros ($68 billion) from 40 billion euros in the last 24 hours, is aimed at balancing the budget by 2014. The upper house approved it by a margin of 161-135. It is due to be approved by the lower house Chamber of Deputies on Friday and signed into law several hours later. [RTRS] US S&P Places U.S. 'AAA/A-1+' ratings on credit watch negative, may lower US L/T rating by 1 or more notches into AA category in next three months if deal does not stabilize the debt, sees US lawmakers raising debt ceiling by end of July. (Reuters) US debt talks ended Thursday with no solution. Obama gives party leaders 24-36 hour deadline. Another White House meeting could come this weekend. US Senator McConnell said that group probably wouldn't meet Friday, protracted talks suggest focus may turn towards backup plan, Leaders plan to discuss next steps with rank-and-file. Democratic source says the President told top lawmakers that a USD 2tn deal would be possible if all sides gave a little. (Reuters) US President Obama may summon congressional leaders to a Camp David summit this weekend after the latest round of White House negotiations on the deficit ended on a tense note. Obama told the lawmakers they have until tomorrow to decide whether they can reach a deal to cut the deficit or settle for a way to raise the $14.3 trillion debt ceiling before US borrowing

authority expires Aug. 2, two Democratic officials said. [BBG] Fed Chairman Bernanke in the second day of the semiannual monetary policy report to the Senate Banking Committee. - He repeated that the Fed was ready to act if recovery falters. But he also said the situation today was somewhat different than when QE2 launched and policy was still very accommodative. Inflation is higher now than late last year, not yet ready to take action. - He said that when considering spending cuts, congress should take into account that the recovery is still rather fragile. Said a Treasury default would be a "calamitous outcome", destroy trust and confidence of investors. Ex-Fed chair Volcker: Limits to what Fed can do to further ease U.S. monetary policy and further measure could even have negative effects. (Reuters) DATA RECAP: Core PPI higher than expected in June at 2.4% y/y (2.2% y/y tipped) versus 2.1% y/y in May. However, headline PPI softer at 7.0% y/y (7.4% tipped) versus 7.3% y/y in May. Retail sales (ex autos and gas) softer than expected in June: +0.2% (+0.4% tipped) versus downwardly revised +0.2% in May (+0.3% pre-revision). Advanced retail sales however stronger +0.1% (-0.1% tipped). Initial weekly jobless claims drop 22K to 405K, better than the 415K expected, from a upwardly revised 427K in the prior week (418K prerevision). JP Morgan profits higher, beats estimates: Q2 EPS $1.27 vs Wall Street view $1.21 with profit lifted by lower costs for bad loans IMF IMF wants G-20 plan to deal with European Banks, warns European bank capitalization remains low ahead of stress tests and vulnerable to a tightening in funding conditions. (Reuters) IMF: Ireland needs quick solution to euro crisis, meeting its targets under EU-IMF bailout, needs Europe to come up with crisis solution, second bailout could happen without private sector pain, still aiming to tap debt markets in 2012, faces big redemption in Jan 2014. (Reuters) IMF says Greek debt comments may help break EU deadlock. Private-sector involvement deal should improve Greece's debt profile, warns that debt rollover and maturity extensions likely to prompt temporary selective default. Economists say IMF's focus on debt sustainability encourages bond buyback strategy. (Reuters) EU and IMF praise Irish austerity program, Ireland hitting benchmarks for government finances, meeting all targets. Officials took pains to laud Ireland and blame much of the financial markets' current pessimism about Foreign Exchange Strategy Friday, 15 July 2011 http://www.GlobalMarkets.bnpparibas.com

the country on the unsettled situation in Greece and in the wider euro zone. (Reuters) JAPAN BOJ Minutes: Potential need for additional easing had not decreased but saw no urgent need to act, important to consider appropriate timing, Yens uptrend could affect sentiment of Japans exporting firms, downside risks from overseas economies had heightened somewhat, Japans data had recovered but remain at low level, more mindful of downside risks than upside risks for Japan, new credit line for growth sector need not be of significant amount, Japan firms increasingly buying overseas firms by taking advantage of yen. (Reuters) Japan FinMin Noda: Yen rises influences by overseas factors, Yens recent rises one-sided in recent days, will monitor FX market carefully, no comment on Yen levels, must try to prevent business mood from worsening due to Yen and power shortages, doesnt think trust in dollar being shaken, expects PM Kan to resign after self-set conditions met. (Reuters) Two BOJ members saw potential need for more easing Two of the Bank of Japan's nine policy board members said at the June board meeting that the potential need for additional easing had not declined, although they saw no urgent need to act or felt there was a need to consider an appropriate timing for a move, minutes of the meeting showed on Friday. (Reuters) CHINA China Stumbles in Yuan Grand Plan to make its currency more international. More than a year later, the People's Bank of China touted the program as a "breakthrough," citing a surge in the amount of trade in the currency. (WSJ) PBOC appears less determined to let yuan rise, pulled the yuan's mid-point back from a record high, suggesting the authorities may temper the currency's pace of appreciation, traders said. (Reuters) China Jan-June FDI rises 18 pct y/y to $61 bln in the first half of the year, 18 percent more than in the same period of 2010, the Commerce Ministry said on Friday. (Reuters) China H2 export outlook uncertain China faces an uncertain export outlook for the rest of the year due to rising production costs and weak foreign demand for its products, the trade ministry said on Friday. (Reuters)

Asian Financial Decoupling

We note with interest the remarkable resilience of traditional risk currencies, particularly the AUD, NZD and Asian currencies, in the face of recent stresses. Whereas in the past a risk-off moment such as this week's Italyrelated stress would have been expected to result in a more significant position unwind, there has been little evidence of rushed selling this time. Indeed, both SGD and NZD made new all-time highs against the USD yesterday. Still-strong Chinese growth supports the wellworn theme of Asian economic decoupling. But the solid balance sheets rebuilt after and in response to the Asian crisis, offer a reassurance sorely lacking in the G4 currencies. Perhaps what we have witnessed over the past few weeks is supportive of the notion of financial decoupling. Flows into the region remain robust as evidenced both by measures of hot money into China, but also from more respectable sources such as EPFR. But with investable assets thin on the ground, real money managers have been reluctant to disengage from the one major region that offers both yield and growth. Regional central banks have helped ease the decision: periods of stress earlier in the year saw authorities dampen volatility on the topside the message has been that while rapid appreciation may not be allowed, neither will rapid depreciation. Massive reserve holdings back up that compact. And those reserve holdings have a second part to play. Against the backdrop of joint EU and US woes, the traditional reserve currencies are increasingly questioned. The role of the EUR as the globes antiUSD is undermined by the current debt crisis and by the weak policy response from European politicians. So while the USD looks unattractive as the Fed edges towards yet another currency-debasing round of QE, market appetite to assume yet more Eurozone risk appears limited, hawkish EBC notwithstanding. These two currencies make up 87.3% of those global reserves for which breakdowns are provided to the IMF; indeed the currencies of the UK and Japan hardly in better fiscal shape and, in the case of the UK, just as exposed to a Euro-calamity make up another 7.9%. Where does a Reserve Manager in search of safety go? Alternatives are limited by lack of depth and liquidity in many markets, but since mid-2009, the Other Currencies component of reserves has jumped from 2.2% of the total to 4.7% in Q1 this year. AUD, and indeed NZD backed in some sense by the hard currency that is commodities have undoubtedly benefited. Against this background of stable growth and stable financial markets, investors may be re-examining the concept of the traditional safe haven. Certainly the CHF, JPY and Gold are likely to continue to outperform in periods of financial stress. And a more significant event shock along the lines of the Lehman crisis would probably still see USD benefit from a large deleveragingdriven bid. But in the meantime, with both USD and EUR suffering from a lack of credibility, Asian, AUD and NZD currencies may represent a different sort of safe haven and continue to outperform as a consequence.

Chart 1: EURUSD vs AUD, KRW

135 130 125 120 115 95.000 110 105 100 95 90 Oct 09 AUDUSD EURUSD 97.500 100.000 102.500 All Rebased 1-July-10 = 100 105.000 Feb Apr Jun 10 Aug Oct Dec Feb Apr Jun 11 USDKRW (RHS, Inversed) 85.000 87.500 90.000 92.500

Source: Reuters EcoWin Pro. Reactions in AUD and KRW markets to eurozone stresses have so far been relatively contained this time around in contrast to the reaction in May last year. Both Korea and Australia have made efforts to wean their banking systems off short-term financing over the past year, but the greater factor behind the resilience is likely that the USD in he meantime has initiated and completely QE2 and may now be headed for QE3. In the meantime the growth and stability of Asia continues to attract investors.

Chart 2: FX Reserve Shifts

80 70 60 50 40 2.5 30 20 10 0 EUR Holdings (%) 2.0 1.5 1.0 01 02 03 04 05 06 07 08 09 10 USD Holdings (%) 3.5 "Other Currencies" (%, RHS) 3.0 4.5 4.0

Source: Reuters EcoWin Pro. The IMFs COFER data detail shifts in the currency composition of official reserves at least for those reserves whose composition is disclosed to the IMF. A slow fall in USD holdings in favour of the EUR was evident for much of the last decade after the introduction of the EUR. However since the financial crisis, that shift has been not into EUR but into other currencies (which does not include GBP, JPY and CHF these are also broken down separately). We assume that AUD and CAD make up a large portion of these others, with NZD also featuring.

Foreign Exchange Strategy Friday, 15 July 2011 http://www.GlobalMarkets.bnpparibas.com

Daily Currency Summary

G3
Todays focus will be on the EU stress tests. While press reports suggest that up to 15 of the 91 banks are likely to fail, the real reaction may have to wait until bank analysts crunch the numbers over the weekend to determine the credibility or otherwise of the tests; and to calculate the relative scores of those institutions taking part. Also of interest will be the plans of national regulators to recapitalise those failing institutions. Meanwhile there has been no further news of an emergency summit of EU leaders; and although there are still hopes that one might be called sooner rather than later, certainly Germany appears in no rush. The approach still seems to be focused on Greece, and with Greece fully funded till September, the conclusion is that there is no need for haste. But this appears a dangerous game: while the passage of the Italian budget may well ease concerns in the short term, the risks of a further slide in confidence over the next couple of months are patent. Lasting uncertainty means that EUR continues to remain vulnerable in our eyes. Certainly EURCHF as a leading indicator of EUR sentiment continues to remain depressed; we continue to favour a lower EUR. USDJPY struggles to rebound even on a less dovish Bernanke. We see little chance of immediate intervention with the stance inconsistent with monetary policy the BoJ upgraded its economic assessment earlier this week. We note with interest that following Vice Minister for International affairs Tamakis departure to the OECD last week, there is currently no top FX official in Japan. Tamaki had been instrumental in putting in place the G7 coordinated intervention in mid-March following the Japanese earthquake. But a softer US CPI print today would threaten a move lower that might force the authorities hand: retail accounts are once again dangerously short yen. We continue to call for a lower EURJPY but are less bearish on other yen crosses. The key will be the extent to which EUR is the driver as Euro-concerns mount over the stress tests; and whether a more significant washout of retail JPY shorts takes place.

EURUSD

USDJPY

JPY Crosses

EUR Bloc
Sterling has done well against both the EUR and the USD but this can be said of most currencies. We remain unconvinced that there will be a more autonomous bid for GBP: at the moment it simply appears less ugly. Nevertheless we see little sign that the EUR is likely to reverse this; the pair now holds just above key uptrend support at 0.8740, a break of which would target the 0.8600 level. EURCHF remains under pressure as there appears little sign of progress over the European debt crisis. We see little chance that the stress tests will ease concerns: a resolution looks to require a more holistic approach to European debt which there appears little appetite for as yet. Things may have to get worse before the get better. Softer oil prices have done little for the NOK, but more importantly, with little upcoming data, EURNOK remains hostage to developments within the Eurozone. With little sign of progress, the bias is for a move back towards the top of the range at 7.95 SEK follows a similar pattern to NOK: risk appetite and Eurozone stresses are driving the pair more than any domestic concerns. The recent high at 9.27 is back within sight, with stops likely above there.

EURGBP

EURCHF EURNOK EURSEK

USD Bloc
USDCAD has recovered 75 pips back up to 0.9614 following Bernankes less dovish commentary on Thursday. Bernanke has appeared to have used the second day of his semi-annual testimony to balance things out a bit, reiterating our contention late Wednesday that while further easing remains possible pending a renewed economic deterioration, they seem improbable. However, 1m implieds have begun to recede, pricing in further rangebound behaviour. Looking ahead, the path for energy prices will more likely determine the path forward for CAD. AUD has fallen as an Australian bank called for more significant rate cuts from the RBA over the next 12 months, but we are more optimistic. The travails of the globe's two most important currencies mean that investors are increasingly running out of places to park their cash. We continue to see inflows into commodity currencies and we expect that dips in the AUD are likely to remain shallow as it remains supported by the sovereign bid and by mining investment inflows. Kiwi continues to outperform its cross-Tasman cousin as relative expectations for rate hikes are repriced. While NZDUSD remains at risk from further risk aversion, we continue to see outperformance against AUD and European currencies as insurance and sovereign inflows lend support.

USDCAD

AUDUSD

NZDUSD

Foreign Exchange Strategy Friday, 15 July 2011 http://www.GlobalMarkets.bnpparibas.com

FX Forecasts*
USD Bloc EUR/USD USD/JPY USD/CHF GBP/USD USD/CAD AUD/USD NZD/USD USD/SEK USD/NOK EUR Bloc EUR/JPY EUR/GBP EUR/CHF EUR/SEK EUR/NOK EUR/DKK Central Europe USD/PLN EUR/CZK EUR/HUF USD/ZAR USD/TRY EUR/RON USD/RUB EUR/PLN USD/UAH EUR/RSD Asia Bloc USD/SGD USD/MYR USD/IDR USD/THB USD/PHP USD/HKD USD/RMB USD/TWD USD/KRW USD/INR USD/VND LATAM Bloc USD/ARS USD/BRL USD/CLP USD/MXN USD/COP USD/VEF USD/PEN Others USD Index *End Quarter Q3 '11 1.50 78 0.83 1.65 0.98 1.09 0.82 5.93 4.98 Q3 '11 117 0.91 1.25 8.90 7.47 7.46 Q3 '11 2.60 24.3 275 6.80 1.52 4.20 27.51 3.90 7.8 100 Q3 '11 1.22 2.95 8500 29.80 42.50 7.80 6.40 28.00 1060 45.50 20500 Q3 '11 4.18 1.58 450 11.40 1730 4.29 2.70 Q3 '11 72.30 Q4 '11 1.55 83 0.83 1.68 0.93 1.13 0.84 5.48 4.77 Q4 '11 129 0.92 1.28 8.50 7.40 7.46 Q4 '11 2.48 24.5 275 6.60 1.50 4.15 27.25 3.85 7.8 100 Q4 '11 1.21 2.90 8400 29.50 42.00 7.80 6.31 27.50 1050 45.00 20000 Q4 '11 4.25 1.55 435 11.10 1690 4.29 2.65 Q4 '11 70.76 Q1 '12 1.45 85 0.90 1.59 0.95 1.07 0.81 5.93 5.07 Q1 '12 123 0.91 1.30 8.60 7.35 7.46 Q1 '12 2.69 24.1 269 6.55 1.56 4.20 27.86 3.90 7.5 98 Q1 '12 1.21 2.87 8300 29.30 41.50 7.80 6.25 27.00 1040 44.50 20000 Q1 '12 4.34 1.53 425 11.00 1690 4.29 2.63 Q1 '12 74.87 Q2 '12 1.40 90 0.93 1.56 0.97 1.04 0.80 6.21 5.26 Q2 '12 126 0.90 1.30 8.70 7.37 7.46 Q2 '12 2.75 23.9 265 6.60 1.59 4.25 27.97 3.85 7.5 97 Q2 '12 1.20 2.85 8200 29.00 41.00 7.80 6.21 26.70 1030 44.00 20000 Q2 '12 4.43 1.55 430 10.90 1700 4.29 2.63 Q2 '12 77.62 Q3 '12 1.35 95 1.00 1.53 1.01 0.99 0.76 6.67 5.56 Q3 '12 128 0.88 1.35 9.00 7.50 7.46 Q3 '12 2.81 23.8 265 6.50 1.63 4.15 28.08 3.80 7.5 96 Q3 '12 1.19 2.83 8100 28.70 40.50 7.80 6.17 26.50 1020 43.50 20000 Q3 '12 4.51 1.56 435 11.00 1710 4.29 2.64 Q3 '12 80.72 Q4 '12 1.35 95 1.00 1.53 1.01 0.99 0.76 6.67 5.56 Q4 '12 128 0.88 1.35 9.00 7.50 7.46 Q4 '12 2.78 23.5 260 6.50 1.65 4.10 27.65 3.75 7.5 95 Q4 '12 1.18 2.80 8000 28.50 40.00 7.80 6.13 26.00 1010 43.00 20000 Q4 '12 4.60 1.58 440 11.10 1720 4.29 2.66 Q4 '12 80.72 Q1 '13 1.30 95 1.04 1.53 1.04 0.96 0.74 6.92 5.77 Q1 '13 124 0.85 1.35 9.00 7.50 7.46 Q1 '13 2.85 23.7 260 7.20 1.65 4.20 28.19 3.70 7.5 93 Q1 '13 1.17 2.77 7900 28.30 39.50 7.80 6.23 26.00 1000 43.00 20000 Q1 '13 4.69 1.59 442 11.10 1725 8.80 2.67 Q1 '13 82.99 Q2 '13 1.30 95 1.04 1.53 1.04 0.96 0.74 6.92 5.77 Q2 '13 124 0.85 1.35 9.00 7.50 7.46 Q2 '13 2.77 24.0 255 7.10 1.67 4.20 27.75 3.60 7.5 92 Q2 '13 1.16 2.75 7800 28.00 39.00 7.80 6.20 26.00 1000 42.50 20000 Q2 '13 4.78 1.60 445 11.17 1730 8.80 2.68 Q2 '13 82.99 Q3 '13 1.30 95 1.04 1.53 1.04 0.96 0.74 6.92 5.77 Q3 '13 124 0.85 1.35 9.00 7.50 7.46 Q3 '13 2.85 23.5 260 7.00 1.69 4.10 29.07 3.70 7.5 91 Q3 '13 1.15 2.73 7800 28.00 39.00 7.80 6.17 26.00 1000 42.50 20000 Q3 '13 4.86 1.61 447 11.25 1740 8.80 2.69 Q3 '13 82.99 Q4 '13 1.30 95 1.04 1.53 1.04 0.96 0.74 6.92 5.77 Q4 '13 124 0.85 1.35 9.00 7.50 7.46 Q4 '13 2.85 23.3 260 6.90 1.69 3.95 27.75 3.70 7.3 90 Q4 '13 1.14 2.70 7800 28.00 39.00 7.80 6.15 26.00 1000 42.00 20000 Q4 '13 4.95 1.62 450 11.30 1750 8.80 2.70 Q4 '13 82.99 Q1 '14 1.34 114 1.09 1.70 1.21 0.78 0.56 6.94 5.07 Q1 '14 153 0.79 1.46 9.30 6.80 7.46 Q1 '14 2.65 23.1 250 6.69 1.54 3.90 27.75 3.55 7.4 85 Q1 '14 --------------------------------------------Q1 '14 ----------------------------Q1 '14 83.88

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FX - Global Strategy Contacts

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This report has been written by our strategy teams. Such reports do not purport to be an exhaustive analysis and may be subject to conflicts of interest resulting from their interaction with sales and trading which could affect the objectivity of this report. (Please see further important disclosures in the text of this report). This report is a marketing communication. It is not independent investment research. It has not been prepared in accordance with legal requirements designed to provide the independence of investment research, and is not subject to any prohibition on dealing ahead of the dissemination of investment research. The information and opinions contained in this report have been obtained from, or are based on, public sources believed to be reliable, but no representation or warranty, express or implied, is made that such information is accurate, complete or up to date and it should not be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or other investment. Information and opinions contained in the report are published for the assistance of recipients, but are not to be relied upon as authoritative or taken in substitution for the exercise of judgement by any recipient, are subject to change without notice and not intended to provide the sole basis of any evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. To the fullest extent permitted by law, no BNP Paribas group company accepts any liability whatsoever (including in negligence) for any direct or consequential loss arising from any use of or reliance on material contained in this report. All estimates and opinions included in this report are made as of the date of this report. Unless otherwise indicated in this report there is no intention to update this report. BNP Paribas SA and its affiliates (collectively BNP Paribas) may make a market in, or may, as principal or agent, buy or sell securities of the issuers mentioned in this report or derivatives thereon. BNP Paribas may have a financial interest in the issuers mentioned in this report, including a long or short position in their securities and/or options, futures or other derivative instruments based thereon, or vice versa. BNP Paribas, including its officers and employees may serve or have served as an officer, director or in an advisory capacity for any issuer mentioned in this report. BNP Paribas may, from time to time, solicit, perform or have performed investment banking, underwriting or other services (including acting as adviser, manager, underwriter or lender) within the last 12 months for any issuer referred to in this report. BNP Paribas may be a party to any agreement with the issuer relating to the production of this report. BNP Paribas, may to the extent permitted by law, have acted upon or used the information contained herein, or the research or analysis on which it was based, before its publication. BNP Paribas may receive or intend to seek compensation for investment banking services in the next three months from or in relation to an issuer mentioned in this report. Any issuer mentioned in this report may have been provided with sections of this report prior to its publication in order to verify its factual accuracy. BNP Paribas is incorporated in France with limited liability. Registered Office 16 Boulevard des Italiens, 75009 Paris. This report was produced by a BNP Paribas group company. This report is for the use of intended recipients and may not be reproduced (in whole or in part) or delivered or transmitted to any other person without the prior written consent of BNP Paribas. By accepting this document you agree to be bound by the foregoing limitations.

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BNP Paribas (2011). All rights reserved.

Foreign Exchange Strategy Friday, 15 July 2011 http://www.GlobalMarkets.bnpparibas.com