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FX Positioning Analysis Summary - 3 April 2017

Core Content Overview

This document provides a detailed FX positioning analysis by BNP Paribas London Branch, authored by Michael Sneyd (Macro Quantitative Strategist) and Natalie Rickard (Graduate). It outlines the current market sentiment and positions for major G10 currencies based on a scoring system that ranges from -50 to +50, derived from historical data over the past five years. Extreme positions are indicated by scores above +40 or below -40.

Key Positions and Views

• JPY (Japanese Yen): The market has built a substantial long position in JPY, with a score of +14. This is the largest long JPY position since the US election, suggesting a strong bullish sentiment.
• USD (US Dollar): Short USD positions have been rebuilt this week, reaching a score of -7. FX funds have taken an extreme short position, indicating a strong bearish sentiment.
• GBP (British Pound): GBP short positions have been reduced to a score of -27, suggesting a moderation in bearish sentiment.
• CAD (Canadian Dollar): The market has switched to a long CAD position, indicating a positive outlook.
• NOK (Norwegian Krone): The short NOK position has been extended, showing continued bearish sentiment.

Positioning Metrics

The positioning scores are calculated using multiple indicators:

• Client Exposure: Internal sales desks' estimate of FX investor exposure.
• IMM (Commitment of Traders): A proxy for US-based hedge-fund/CTA activity.
• Risk Reversals: Reflect the relative price of calls versus puts, incorporating option market sentiment.
• FX Fund Position Tracker: A regression-based decomposition of currency fund positioning.
• BNPP Trending Indicator: A technical measure of the strength of a currency's momentum.

The overall currency score is an equally weighted average of these components.

Visual Representations

• Chart 1: Overall FX Positioning Analysis, showing the current scores.
• Chart 2: Absolute Total G10 Positioning, illustrating the magnitude of positions.
• Chart 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22: Individual currency positioning scores over time, including 1-year and 3-year historic plots.

These charts are sourced from BNP Paribas and provide visual insights into the market positioning dynamics.

Strategy Contacts

The following are key contacts for FX strategies across different regions:

Legal and Distribution Notice

• The document is a marketing communication and not investment research.
• It is intended for Professional Clients and Eligible Counterparties under MiFID.
• It may not be suitable for all investors and is not a recommendation to buy or sell.
• BNP Paribas may have conflicts of interest and may engage in transactions contrary to the views expressed.
• No liability is accepted for any loss resulting from reliance on this document.
• The information is based on public sources and may not be independently verified.
• The document is not a prospectus and does not constitute an offer to sell or purchase securities.

Important Disclosures

• Options: Complex instruments with high risk, suitable only for sophisticated investors.
• ETFs: Carry risks including tracking error, currency, and geopolitical risks.
• Securities: Some may not be registered under US Securities Laws and are considered restricted.
• QIBs: Only Qualified Institutional Buyers may be eligible to purchase such instruments.
• Confidentiality: Information is provided on a strictly confidential basis and may not be distributed without consent.

Distribution and Legal Information

• Production: By BNP Paribas group company.
• Distribution: Intended for specific recipients only.
• UK: BNP Paribas London Branch, 10 Harewood Avenue, London NW1 6AA.
• France: BNP Paribas SA and BNP Paribas Arbitrage, authorized and supervised by ECB and ACPR.
• Germany: BNP Paribas Niederlassung Deutschland, subject to limited supervision by BaFin.
• Belgium: BNP Paribas Fortis SA/NV, authorized and supervised by ECB and National Bank of Belgium.
• Ireland: BNP Paribas S.A., Dublin Branch, regulated by ECB and ACPR.

Disclaimer

• The document is for information purposes only.
• No assurance is given that any transaction will be entered into on the terms indicated.
• Indicative prices are based on internal models and may vary significantly from other sources.
• BNP Paribas does not provide investment, financial, legal, or tax advice.
• Past performance is not indicative of future results.
• The document may contain back-tested performance data for illustrative purposes only.