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MAY LOSE VALUE

Citibank Wealth Management

Dec 3, 2018
with data as of Nov 30, 2018

Weekly FX Strategy FX Analysis Data Forecasts

Weekly FX Insight Please note and carefully read the

Important Disclosure on the last part
0
Please note and carefully read the Important Disclosure on the last part

Weekly FX Strategy: EUR

EUR news Strategy for EUR holders - Diversify into USD
• Fed Chair Powell said that the Fed’s benchmark interest rate was “just
below” the neutral level and the minutes also turned dovish. Future rate • Italy’s budget issue and recent weak Euro Area data may
hikes may become more data dependent, which may undermine USD. undermine EUR.
• The G20 summit between Trump and Xi has achieved a temporary
ceasefire. The US will stop imposing additional tariffs on US$200bn • Markets are now pricing in only one hike by the FOMC in
exports on Jan 1st. But if they were to fail to achieve an agreement within 2019, which may be too pessimistic. If expectations are
90 days, the tariffs on US$200bn Chinese exports will be increased to
25%. Major currencies were underpinned on Monday morning.
revised up later, USD may be underpinned and EUR may be
undermined.
EUR outlook
• Periphery spreads widened as Italian efforts to run higher budget deficits Strategy Reference Level Target Level
in defiance of EU advisory rumble on. This undermines EA banks and
hurts EUR. We see no immediate respite on this front with spreads Bearish on EUR USD 1.1709 1.1187
possibly remaining elevated, or rising further. US fiscal stimulus and
Chinese monetary reflation have limited impacts on EA data momentum. Bearish on EUR HKD 9.16 8.75
Long term, EUR may be supported as the ECB tapers QE to zero and
normal positive bond supply in EA sovereigns resumes in 2019.
0-3M forecast: 1.13 6-12M forecast: 1.18 LT forecast: 1.30 Strategy for USD holders - Buy EUR upon retracement
EUR/USD – Daily Chart • The Fed may hike rates in Dec but may be hesitant about
rate hikes next year. The Fed may only hike rates twice next
year (in Mar and Jun), which may undermine USD and
1.1709(fibo 0.618) support EUR.
• The outcome of Trump-Xi meeting, albeit a temporary truce,
1.1187 (Nov low) is likely to generate positive momentum in risk assets and
reverse some of early USD gains, which may support EUR.
Strategy Reference Level Target Level
Bullish on EUR USD 1.1187 1.1709
Source: Bloomberg L.P., as of Nov 30, 2018 Bullish on EUR HKD 8.75 9.16
• EUR/USD’s RSI rose from oversold territory, implying limited
downside. The pair may range trade between 1.1187-1.1709
in short term. The brackets are the exchange rates in terms of Hong Kong
dollar, with HKD $7.8240 exchange rate for reference 1
Please note and carefully read the Important Disclosure on the last part

Weekly FX Strategy: CAD

CAD news
• CAD was underpinned as the USMCA was signed at G20
meeting.
• CAD was supported as Canada’s current account deficit
narrowed to CAD10.034 bn, better than expected.
• Oil prices stabilized. WTI crude rebounded last week, which
underpinned CAD.
Strategy for CAD holders - Diversify into USD
• Canada mainly export oil products. Oil price has dropped
recently. CAD may be restrained amid concerns on
Canada’s export income.
• We don’t think the USD has peaked yet and still seem room
to rebuild dollar longs, once the risk rally from Trump-Xi
meeting fades. This will likely restrain the CAD.

CAD outlook
Strategy Reference Level Target Level
• The BoC estimates the neutral rate to be in the range of
2.5%-3.5%. We continue to expect three more rate hikes in Bearish on CAD USD 1.2952 1.3386
2019, which would take the policy rate to 2.5% and underpin Bearish on CAD HKD 6.04 5.85
the CAD. However, recent oil weakness may restrain CAD.

0-3M forecast: 1.33
USD/CAD – Daily Chart
6-12M Forecast: 1.30 LT Forecast: 1.20 Strategy for USD holders - Buy CAD upon retracement
• The USMCA was signed at G20 meeting. Next steps for the
1.3386 (Jun top) USMCA include its ratification in 2019 and the
implementation in 2020, which may underpin CAD.
• The BOC’s rate hike pace is only slower than the Fed. The
1.2952(fibo 0.618) BoC may hike rates for three times next year while the Fed
may end its rate hike cycle in 2Q19.

Strategy Reference Level Target Level

Bullish on CAD USD 1.3386 1.2952
Bullish on CAD HKD 5.85 6.04
Source: Bloomberg L.P., as of Nov 30, 2018
• USD/CAD is still within the short term up channel but traded
near June’s top of 1.3386, implying limited upside. The pair
may range trade between 1.2952-1.3386 in short term. The brackets are the exchange rates in terms of Hong Kong
dollar, with HKD $7.8240 exchange rate for reference 2
Please note and carefully read the Important Disclosure on the last part

EUR/GBP

0.9145(fibo 0.236)

0.8883(fibo 0.618)

AUD/NZD

1.0889(fibo 0.50)

1.0590 (Nov low)

Source: Bloomberg L.P., as of Nov 23, 2018 3

Please note and carefully read the Important Disclosure on the last part

The brackets are the exchange rates in terms of Hong Kong

Dollar Index dollar, with HKD $7.8240 exchange rate for reference
USD outlook: 0-3M forecast: 97.62 6-12M forecast: 94.18 LT forecast: 84.85
• More medium term, our view is that the fiscal support to growth
eventually fades in the US and tighter monetary policy starts to 0-3M forecast: 97.62
bite. Moreover, In 2Q19 we expect the Fed to raise rates for the
last time. In Q3 we expect the ECB to begin raising rates. Fading
USD yield advantage may undermine USD.
• Developments in other major countries and regions will matter. 6-12M forecast: 94.18
Europe will have to deal with stress in Italy in the near term and
the Brexit situation over the medium term. This may be a drag
on the EUR, which may underpin USD.
• USD around 1% stronger vs. G10 over 0-3m and around 2%
weaker over 6-12m.
• Dollar index 0-3 month forecast: 97.62; 6-12 month forecast:
94.18; Long term forecast: 84.85.
Source: Bloomberg L.P., as of Nov 30, 2018

USD/CNH
RMB outlook: 0-3M forecast: 7.00 6-12M forecast: 6.95 LT forecast: 6.50
• DXY strengthening, the US-China trade war further escalating
and capital outflow owing to the growth slowdown and divergent 6.9895 (Jan 2017 top)
monetary policy with other countries are key risks. We believe
PBoC won’t tolerate the currency to be driven either by the
market force or by a strong dollar to have a one-way large 6.8117(fibo 0.236)
depreciation.
Strategy Reference Level Target Level
Bearish on CNH USD 6.8117 6.9895
Bearish on CNH HKD 1.1486 1.1194

Bullish on CNH USD 6.9895 6.8117

Bullish on CNH HKD 1.1194 1.1486 Source: Bloomberg L.P., as of Nov 30, 2018 4
Please note and carefully read the Important Disclosure on the last part

The brackets are the exchange rates in terms of Hong Kong

NZD/USD dollar, with HKD $7.8240 exchange rate for reference
NZD outlook: 0-3M forecast: 0.68 6-12M forecast: 0.66 LT forecast: 0.67
• The November RBNZ meeting seemed more upbeat than the past few
months with risks now ‘balanced’ amid firmer quarterly inflation data
coupled with strong labor market data. NZD looks slightly cheap to dairy
prices in the short term, so a short term move higher is plausible. Cooling
housing sector and business confidence downtrend signs may undermine
NZD in the long term. Meanwhile, trade war risks continue to rumble on 0.6931(fibo 0.50)
and with ADXY continuing to fall, this also leaves NZD looking vulnerable.
Strategy Reference Level Target Level
0.6648(55MA)
Bearish on NZD USD 0.6931 0.6600
Bearish on NZD HKD 5.42 5.16

Bullish on NZD USD 0.6600 0.6931

Bullish on NZD HKD 5.16 5.42 Source: Bloomberg L.P., as of Nov 30, 2018

AUD/USD
AUD outlook: 0-3M forecast: 0.71 6-12M forecast: 0.70 LT forecast: 0.77
• Tighter credit conditions are spreading beyond housing to businesses
amid continued housing market correction in Australia. Meanwhile,
although the labor market remains strong, wage growth is tepid and
the RBA may keep interest rates unchanged. if the Chinese authorities
ease monetary conditions via weakening of the RMB, AUD may move
with it. Stretched net short speculative positioning in AUD/USD, AUD
may find support at lows.
0.7484(Jul top)

Strategy Reference Level Target Level 0.7382 (Aug 21 top)

0.7021 (Oct low)
Bearish on AUD USD 0.7382 0.7021
Bearish on AUD HKD 5.78 5.50

Bullish on AUD USD 0.7021 0.7382

Bullish on AUD HKD 5.50 5.78 Source: Bloomberg L.P., as of Nov 30, 2018 5
Please note and carefully read the Important Disclosure on the last part

The brackets are the exchange rates in terms of Hong Kong

GBP/USD dollar, with HKD $7.8240 exchange rate for reference
GBP outlook: 0-3M forecast: 1.26 6-12M forecast: 1.30 LT forecast: 1.48
• Political uncertainty may cause significant downside risks. It seems
likely that the draft UK-EU withdrawal agreement will be voted down
by the “Meaningful Vote” in the House of Commons. Therefore, the
probability of a market friendly transition arrangement are falling fast.
The UK is facing completely unchartered waters on economic and 1.3175(Nov top)
political spectrum. What’s cheap can certainly get cheaper.
Strategy Reference Level Target Level 1.2662(Aug low)

Bearish on GBP USD 1.3175 1.2662 1.2351(Apr 2017 low)

Bearish on GBP HKD 10.32 9.91

Bullish on GBP USD 1.2662 1.3175

Bullish on GBP HKD 9.91 10.32
Source: Bloomberg L.P., as of Nov 30, 2018

USD/JPY
JPY outlook: 0-3M forecast: 115 6-12M forecast: 113 LT forecast: 100
• For much of this year, USD/JPY has been driven by rising US
114.73(Nov 2017 top
real yields. yields still seem in a rising trend over 0-3m, which
may pressure JPY. Real yields may finally retreat as Fed policy
ends up restrictive just when the fiscal stimulus from tax reform
110.84(fibo 0.382)
begins to fade, which may support JPY.

Strategy Reference Level Target Level

Bearish on JPY USD 110.84 114.73
Bearish on JPY HKD 7.06 6.82

Bullish on JPY USD 114.73 110.84

Bullish on JPY HKD 6.82 7.06 Source: Bloomberg L.P., as of Nov 30, 2018 6
Please note and carefully read the Important Disclosure on the last part

The brackets are the exchange rates in terms of Hong Kong

USD/CHF dollar, with HKD $7.8240 exchange rate for reference
CHF outlook: 0-3M forecast: 1.00 6-12M forecast: 0.98 LT forecast: 0.92
• Swiss inflation appears to be waning again. A SNB Governing
Board Member also affirmed our view that the SNB is also in no
1.0171 (Mar 2017 top)
rush to tighten policy as inflationary pressures remained low.
• With the currency still “highly valued, the SNB may want to see
CHF weaken in the medium term.
• In the short term, rising periphery spreads may contribute to
CHF appreciation. Thus, there may come a time where the SNB
intervenes 0.9789 (Jun low)

Technical Analysis:
• Since the RSI has risen to overbought territory, USD/CHF short-
term upside may be limited and the pair may range trade
between 0.9953-1.0171. Source: Bloomberg L.P., as of Nov 30, 2018

EM Currencies
EM Currencies outlook:
• Over the past month, EM FX stayed flat versus the dollar.
• We see EM FX roughly 1% stronger vs the USD. This forecast is
based on a stronger EUR forecast in 12m, higher equities, and
broadly flat oil prices that we predicts.
• We expect Asian currencies to strengthen by 1.1% in 6-12m.
• We see LatAm FX appreciate 2.1% in 6-12m.

Source: Bloomberg L.P., as of Nov 30, 2018 7

Please note and carefully read the Important Disclosure on the last part

Appendix 1: Last week performance, Citi interest rate and FX Forecasts

Citi FX Outlook Forecast Citi FX interest rate Forecast

0-3 month 6-12 month Long-term 11/30/2018 4Q ‘18 1Q ’19 2Q ’19
Dollar Index 97.62 94.18 84.85 2.25 2.50 2.75 3.00
EUR/USD 1.13 1.18 1.30 0.00 0.00 0.00 0.00
GBP/USD 1.26 1.30 1.48 0.75 0.75 0.75 0.75
USD/JPY 115 113 100 -0.10 -0.10 -0.10 -0.10
USD/CHF 1.00 0.98 0.92 -0.75 -0.75 -0.75 -0.75
AUD/USD 0.71 0.70 0.77 1.50 1.50 1.50 1.50
NZD/USD 0.68 0.66 0.67 1.75 1.75 1.75 1.75
USD/CAD 1.33 1.30 1.20 1.75 1.75 2.00 2.25
USD/CNY 7.00 6.95 6.50 3.40 3.40 3.40 3.40
Source: Citi, forecast as of Nov 16, 2018 Rate cut Rate hike
expectations expectations

Major Currencies Weekly Performance

Last week Weekly Year-To-Date
1 month high 1 month low 3 month high 3 month low 52 week high 52 week low
CCY close Change Change
USD 97.27 0.4% 97.54 96.00 97.54 93.91 97.69 88.25 5.6%
EUR/USD 1.1317 -0.2% 1.1454 1.1218 1.1777 1.1218 1.2555 1.1216 -5.6%
USD/JPY 113.57 0.5% 114.07 112.55 114.53 110.75 114.55 104.56 0.9%
GBP/USD 1.2749 -0.5% 1.3126 1.2706 1.3265 1.2706 1.4377 1.2662 -5.7%
USD/CAD 1.3292 0.4% 1.3306 1.3086 1.3306 1.2814 1.3386 1.2251 5.2%
AUD/USD 0.7306 1.0% 0.7332 0.7073 0.7332 0.7052 0.8136 0.7021 -5.7%
NZD/USD 0.6872 1.3% 0.6878 0.6517 0.6878 0.6443 0.7438 0.6425 -2.7%
USD/CHF 0.9979 0.1% 1.0109 0.9935 1.0109 0.9587 1.0128 0.9188 2.5%
USD/CNY 6.9605 0.2% 6.9757 6.8907 6.9757 6.8228 6.9799 6.2431 6.5%
USD/CNH 6.9500 0.1% 6.9746 6.8981 6.9752 6.8351 6.9805 6.2361 5.8%
GOLD 1220.52 -0.2% 1233.43 1200.37 1233.79 1182.83 1366.15 1160.39 -6.3%

Source: Bloomberg L.P., as of Nov 30, 2018 8

Please note and carefully read the Important Disclosure on the last part

Appendix 2: Last week’s Economic Figures

Time Importance Event Period Actual Survey Prior

Monday
11/26/18 05:45 NZ !! Retail Sales Ex Inflation QoQ 3Q 0.00% 1.00% 1.10%
11/26/18 17:00 GE !! IFO Business Climate Nov 102.0 102.3 102.9
Tuesday
11/27/18 05:45 NZ !! Trade Balance NZD Oct -1295m -850m -1596m
11/27/18 05:45 NZ !! Exports NZD Oct 4.86b 4.88b 4.25b
11/27/18 05:45 NZ !! Imports NZD Oct 6.15b 5.74b 5.84b
11/27/18 23:00 US !! Conf. Board Consumer Confidence Nov 135.7 135.7 137.9
Wednesday
11/28/18 21:30 US !! Advance Goods Trade Balance Oct -$77.2b -$77.0b -$76.0b
11/28/18 21:30 US !!! GDP Annualized QoQ 3Q 3.50% 3.50% 3.50%
11/28/18 23:00 US ! New Home Sales MoM Oct -8.90% 4.00% -5.50%
Thursday
11/29/18 08:00 NZ ! ANZ Business Confidence Nov -37.1 -- -37.1
11/29/18 08:30 AU !! Private Capital Expenditure 3Q -0.50% 1.00% -0.90%
11/29/18 21:30 CA ! Current Account Balance 3Q -$10.34b -$12.00b -$16.68b
11/29/18 21:30 US !! Personal Income Oct 0.50% 0.40% 0.20%
11/29/18 21:30 US !! Personal Spending Oct 0.60% 0.40% 0.20%
11/29/18 21:30 US ! Initial Jobless Claims Nov 234k 220k 224k
11/29/18 23:00 US !! Pending Home Sales NSA YoY Oct -4.60% -2.80% -3.30%
Friday
11/30/18 03:00 US !!! FOMC Meeting Minutes Nov -- -- --
11/30/18 05:00 NZ ! ANZ Consumer Confidence MoM Nov 2.80% -- -1.90%
11/30/18 05:45 NZ ! Building Permits MoM Oct 1.50% -- -1.30%
11/30/18 09:00 CH !! Non-manufacturing PMI Nov 53.4 -- 53.9
11/30/18 09:00 CH !! Manufacturing PMI Nov 50.0 50.2 50.2
11/30/18 18:00 EC !! CPI Estimate YoY Nov 2.00% 2.10% 2.20%
11/30/18 21:30 CA !! GDP YoY Sep 2.10% -- 2.40%

Source: Bloomberg L.P. 9

Please note and carefully read the Important Disclosure on the last part

Appendix 3: Upcoming Economic Figures (Dec 3, 2018 – Dec 7, 2018)

Time Importance Event Period Actual Survey Prior

Monday
12/03/18 07:50 JN !! Capital Spending YoY 3Q -- -- 12.80%
12/03/18 17:00 EC !! Markit Eurozone Manufacturing PMI Nov -- -- --
12/03/18 17:30 UK !! Markit UK PMI Manufacturing SA Nov -- -- 51.1
12/03/18 23:00 US !! ISM Manufacturing Nov -- 58.3 57.7
Tuesday
12/04/18 11:30 AU !! RBA Cash Rate Target Dec -- 1.50% 1.50%
Wednesday
12/05/18 08:30 AU !! GDP YoY 3Q -- -- 3.40%
12/05/18 17:00 EC !! Markit Eurozone Services PMI Nov -- -- --
12/05/18 17:30 UK !! Markit/CIPS UK Services PMI Nov -- -- 52.2
12/05/18 21:15 US !! ADP Employment Change Nov -- -- 227k
12/05/18 23:00 CA !!! Bank of Canada Rate Decision Dec -- 1.75% 1.75%
12/05/18 23:00 US !! ISM Non-Manufacturing Index Nov -- 59.5 60.3
Thursday
12/06/18 08:30 AU !! Trade Balance Oct -- -- A$3017m
12/06/18 08:30 AU ! Retail Sales MoM Oct -- -- 0.20%
12/06/18 21:30 CA !! Int'l Merchandise Trade Oct -- -- -0.42b
12/06/18 21:30 US !! Trade Balance Oct -- -$53.0b -$54.0b
12/06/18 21:30 US ! Initial Jobless Claims Dec -- -- --
12/06/18 23:00 CA ! Ivey Purchasing Managers Index SA Nov -- -- 61.8
Friday
12/07/18 18:00 EC !! GDP SA YoY 3Q -- -- 1.70%
12/07/18 21:30 CA !! Net Change in Employment Nov -- -- 11.2k
12/07/18 21:30 CA !! Unemployment Rate Nov -- -- 5.80%
12/07/18 21:30 US !!! Change in Nonfarm Payrolls Nov -- 208k 250k
12/07/18 21:30 US !!! Unemployment Rate Nov -- 3.70% 3.70%
12/07/18 21:30 US !!! Average Hourly Earnings MoM Nov -- 0.30% 0.20%
12/07/18 23:00 US !! U. of Mich. Sentiment Dec -- -- 97.5

Source: Bloomberg L.P. 10

Please note and carefully read the Important Disclosure on the last part

Appendix 4: Upcoming Economic Figures (Dec 10, 2018 – Dec 14, 2018)

Time Importance Event Period Actual Survey Prior

Monday
12/10/18 07:50 JN !! GDP Annualized SA QoQ 3Q F -- -- -1.20%
12/10/18 08:30 AU ! Home Loans MoM Oct -- -- -1.00%
12/10/18 17:30 UK !! Visible Trade Balance GBP/Mn Oct -- -- -£9731m
12/10/18 17:30 UK !! Industrial Production YoY Oct -- -- 0.00%
12/10/18 17:30 UK !! Manufacturing Production YoY Oct -- -- 0.50%
12/10/18 17:30 UK !! GDP (MoM) Oct -- -- 0.00%
12/10/18 21:15 CA ! Housing Starts Nov -- -- 205.9k
12/10/18 21:30 CA ! Building Permits MoM Oct -- -- 0.40%
Tuesday
12/11/18 08:30 AU ! NAB Business Confidence Nov -- -- 4
12/11/18 17:30 UK !! Average Weekly Earnings 3M/YoY Oct -- -- 3.00%
12/11/18 17:30 UK !! ILO Unemployment Rate 3Mths Oct -- -- 4.10%
Wednesday
12/12/18 07:30 AU ! Westpac Consumer Conf SA MoM Dec -- -- 2.80%
12/12/18 21:30 US !!! CPI YoY Nov -- -- 2.50%
12/12/18 21:30 US !!! CPI Ex Food and Energy YoY Nov -- -- 2.10%
Thursday
12/13/18 03:00 US ! Monthly Budget Statement Nov -- -- -$100.5b
12/13/18 08:01 UK !! RICS House Price Balance Nov -- -- -10%
12/13/18 20:45 EC !!! ECB Main Refinancing Rate Dec -- -- 0.00%
12/13/18 21:30 US !! Initial Jobless Claims Dec -- -- --
Friday
12/14/18 07:50 JN !! Tankan Large Mfg Index 4Q -- -- 19
12/14/18 10:00 CH !! Retail Sales YoY Nov -- -- 8.60%
12/14/18 10:00 CH !! Industrial Production YoY Nov -- -- 5.90%
12/14/18 16:30 EC !! Markit Eurozone Manufacturing PMI Dec -- -- --
12/14/18 21:30 US !!! Retail Sales Advance MoM Nov -- 0.40% 0.80%
12/14/18 21:30 US !!! Retail Sales Ex Auto MoM Nov -- 0.50% 0.70%

Source: Bloomberg L.P. 11

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13
Important Disclosure
Unrated or non investment grade Debt Securities typically offer a higher yield than investment grade Debt Securities, but
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many other fixed income Debt Securities.
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Downgrade Risk – Downgrades in the credit rating of unrated or non investment grade Debt Securities by rating agencies
are generally accompanied by declines in the market value of these Debt Securities. In some circumstances, investors in
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Higher Vulnerability to economic cycles - During economic downturns, unrated or non investment grade Debt Securities are
typically more susceptible to price volatility and fall more in value than investment grade Debt Securities as i) investors may
reevaluate holdings in lower-quality bonds in favor of investment-grade corporate Debt Securities; ii) investors become
more risk averse; and iii) default risk rises. This is often referred to a “flight to quality”.
Event Risk – This includes any of a variety of events that can adversely affect the issuer of unrated or non investment
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generally upon the overall economy. It could have a direct or indirect impact on the issuer and their outstanding debts.

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Important Disclosure
Risk relating to RMB – If you choose RMB as the base currency or the alternate currency, you should also note the
following:

RMB is currently not freely convertible through banks in Hong Kong. Due to exchange controls and/or restrictions imposed
on the convertibility, utilisation or transferability of RMB (if any) which in turn is affected by, amongst other things, the PRC
government's control, there is no guarantee that disruption in the transferability, convertibility or liquidity of RMB will not
occur. There is thus a likelihood that you may not be able to convert RMB received into other freely convertible currencies.

CNH exchange rates and CNY exchange rates are currently quoted in different markets with different exchange rates,
whereby their exchange rate movements may not be in the same direction or magnitude. Therefore, the CNH exchange
rate may be different from the CNY exchange rate.

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