Please note and carefully read the

Important Disclosure on the last page

Daily FX & Market Commentary

Mar 4, 2015
Market Recap Published from Tuesday to Friday

• US stocks fell: S&P 500 retreated 0.5% as Table: Daily Market Movement (Mar 3, 2015)
Feb auto sales fell short of expectations Equity Market Indices Close Change % Commodity Futures
attributed to poor winter weather and U.S. Energy & Metals Close %
technology stocks also pulled back after a S&P 500 Index 2,107.78 -9.6 -0.5% WTI Crude Oil (USD/bbl) 50.52 +1.9%
Dow Jones Industrial Average 18,203.37 -85.3 -0.5% Brent Crude (USD/bbl) 61.02 +2.5%
strong run recently. NASDAQ Composite Index 4,979.90 -28.2 -0.6% Natural Gas (USD/MMBtu) 2.71 +0.5%
• Europe stocks fell: Stoxx 600 fell 0.9% as Europe COMEX Gold (USD/oz) 1,204.4 -0.3%
DAX fell 1.1% despite Germany’s Jan retail Stoxx Europe 600 Index 387.68 -3.6 -0.9% LME Copper (USD/MT) 5,905.5 0.0%
DAX Index 11,280.36 -130.0 -1.1% Bond Yields & CNY
sales came in higher than maker’s Japan U.S. Treasuries - Yields Close Change
expectation, gaining 5.3% year-on-year. TOPIX Index 1,526.83 +1.9 +0.1% 3-Month - Yield (%) 0.01 0.00
Nikkei 225 Stock Average 18,815.16 -11.7 -0.1% 5-Year - Yield (%) 1.61 +0.03
• China stocks fell: Hang Seng China
China / Hong Kong 10-Year - Yield (%) 2.12 +0.04
Enterprise and CSI 300 fell 2.2% and 2.6% Hang Seng Index 24,702.78 -184.7 -0.7% 30-Year - Yield (%) 2.71 +0.03
respectively as Chinese banks fell 1.5%– Hang Seng China Enterprises 11,945.25 -268.5 -2.2% USD/CNY Close %
3%, following China’s rate cut last Shanghai SE Composite 3,263.05 -73.2 -2.2% China Renminbi Spot 6.27 +0.0%
Data Source: Bloomberg L.P.
weekend. Meanwhile, Macau casino stocks
rebound on better than expected gross
gaming revenue in Feb.

Hot News: The RBA kept rate unchanged but AUD upside
may be limited
Chart: AUD/USD – Daily chart Citi analysts’ view:
• The only material difference between the Mar and
Feb statements was the removal of “the fall in energy
prices can be expected to offer significant support to
consumer spending”.
• The recent pick-up in petrol prices may have promoted
0.7915-0.7971 this removal. Whatever the cause, its removal would be
(channel top ,55MA)
an argument for cutting sooner rather than later.
• On balance we lean towards a 25bp cut at the May
0.7626 (Feb low)
Board meeting when the Bank will have its updated
economic forecasts, which we suspect may show a
Source: Citi, as of Mar 3, 2015 further slight downgrade to the growth outlook.
• For AUD, should the dollar continues higher broadly,
AUD/USD rebounded yesterday
• There was no change in the cash rate at yesterday’s the move should be particularly short-lived. The fact
RBA Board meeting, following the 25bp cut last that the RBA hinted further cuts could come may also
month. serve to limit upside.
• The market had priced 15bps of a cut prior to the • On technical analysis(chart), AUDUSD still remains
decision being announced and the market had in a bearish channel. Resistance levels are at 0.7915-
expected a quick follow-up after the Feb easing. 23 (channel top) and 0.7971 (55MA).
• AUD/USD rebounded sharply by 0.7% to close at • A breach of the trend low at 0.7626 would leave the
0.7817 yesterday, outperforming other major way for a move to the channel base to be tested at
currencies. 0.7393.

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

Daily FX & Market Commentary

FX & Commodity Technical Corner
Citi Foreign Exchange
YESTERDAY PERFORMANCE FX TREND TECHNICAL
Forecast:
CCY
Short Term 0-3 6-12
Close Price Day High Day Low Support Resistance
Comment Months Months
USD 95.46 95.51 95.06 Bullish 90.00 95.86 95.42 106.94
EUR/USD 1.1176 1.1218 1.1155 Bearish 1.1098 1.1534 1.12 0.99
USD/JPY 119.73 120.27 119.38 Neutral 115.50 121.85 118.00 130.00
GBP/USD 1.5361 1.5398 1.5345 Bullish 1.5333 1.5628 1.53 1.32
USD/CAD 1.2496 1.2543 1.2433 Neutral 1.2285 1.2799 1.25 1.30
AUD/USD 0.7817 0.7845 0.7752 Neutral 0.7626 0.7971 0.75 0.70
NZD/USD 0.7550 0.7574 0.7502 Neutral 0.7177 0.7613 0.74 0.67
USD/CHF 0.9613 0.9618 0.9558 Bullish 0.9157 1.0000 0.98 1.11
USD/SGD 1.3627 1.3663 1.3611 Neutral 1.3370 1.3792 1.37 1.40
GOLD 1203.83 1214.97 1195.56 Bullish $1,167 $1,255 1270 1240
FX Rate Source: Bloomberg L.P. (cut off time is NY Time 5:00pm)

• AUD rebounded: There was no change in the cash rate at yesterday’s RBA Board meeting.
• NZD rose: The GlobalDairyTrade price index rose 1.1% at today’s auction.
• GBP pared loss: U.K. Construction PMI rose from 59.1 to 60.1 in Fec, topped market expectations.
• CAD advanced: Canada GDP rose from 2.0% to 2.8% (YoY) in Dec 2014, topped market estimates.

Daily FX Focus

GBP/AUD may trade inside 1.9365-2.0029

2.0029 (Feb top) Recap:
• GBP/AUD dropped on AUD’s strength as
the RBA unexpectedly kept its interest rate
1.9365 (fibo 0.236) unchanged.

GBP/AUD Outlook:
• Despite AUD’s recovery yesterday, the
policy stance of the RBA remains dovish
as it said further easing of policy may be
appropriate over the period ahead.
• Given the weak jobs data, capex
expectation for FY16 and soft income data,
we expect the RBA may cut the rate by
25bps in May Board meeting, when the
Source: Bloomberg L.P., data as of Mar 4, 2015 bank may downgrade the growth outlook.
This may be AUD-negative.
Technical Analysis: • The GBP may outperform as the strong
• 1) The pair is still inside the uptrend channel; 2) RSI: edge lower manufacturing and construction PMIs (54.1
from overbought region & 60.1, both better than expected) show
• We expect GBP/AUD may trade inside 1.9365-2.0029 first before the economy remains solid.
testing higher to 2.0029.

NOTE: The brackets are the exchange rates in terms of Hong Kong dollar, with HKD $7.75 exchange rate for reference, and 1,000 yen per unit for JPY/HKD.
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 Please note and carefully read the
Important Disclosure on the last page

Daily FX & Market Commentary

USD/CAD may trade inside 1.2285-1.2799:
1.2799 (Jan top) CAD Outlook:
• Despite better-than-expected Canadian GDP
growth (2.4% annualized in Q4-2014), the
1.2285-1.2352 (fibo details suggest the economy is constrained
0.236 & Feb low) from tumbling oil prices and lackluster
external demand, as net export slashed
1.1% annualized from overall growth.
• Real domestic income dropped 0.4%
annualized in Q4 due to weak term of trade.
• Terms of trade may remain weak for the
balance of this year and through the first half
of next year, boding poorly for growth in
corporate profits and household incomes.
• We expect the BoC can see the same flaws
Source: Bloomberg L.P., data as of Mar 4, 2015 in the GDP data, but is unlikely to alter its
Technical Analysis: stance on this sole report.
• 1) RSI: flat ; 2) USD/CAD find support at 1.2285-1.2352. • Therefore, the CAD may trade inside the
• We expect USD/CAD may trade inside 1.2285-1.2799 first range first.
before testing higher to 1.2799.

Investment Market Update

Chinese banks may have priced in negative earnings effects
from rate cuts
Chart: Deposit Rates at the New Ceilings Citi analysts’ view:
• Assume that deposit rates are largely unchanged
due to the lifting of the deposit rate ceiling, we
estimate the average incremental impact from
this rate cut on the sector to be 6-7% of
earnings and 8bps of net interest margins (NIMs).
• We believe the negative earnings effects from rate
cuts and rate liberalization are well anticipated by
*To assess the full impact of deposit rate ceiling revisions, we assume that all the market. The sector is attractively valued on
deposit rates ceilings limits with immediate effect.
Sources: PBOC, Citi Research estimates, as of Mar 2 2015 0.9x 2015 estimated price-to-book and 5.6%
dividend yield.
Deposit rate ceiling was raised to 1.3x the • Citi analysts anticipate 5% earnings growth for the
benchmark rate: sector in 2015 and 11bps decline in NIM.
• On Saturday, the People’s Bank of China announced • Chinese banks are beneficiaries of policy
the second rate cut since Nov 2014, with both 1-year loosening (through the support this provides to the
lending rate and 1-year deposit rate reduced by 25bp. economy) and structural reforms (e.g. fiscal and
The announced rate cut is symmetric. debt reforms).
• The PBOC also said deposit rate ceiling was raised to • This rate cut is another step closer to full
1.3x the benchmark rate, from 1.2x previously and deposit rate liberalization and achieving the
1.1x before Nov (chart). government's financial reform agenda, which is a
longer-term positive for the system.
NOTE: The brackets are the exchange rates in terms of Hong Kong dollar, with HKD $7.75 exchange rate for reference, and 1,000 yen per unit for JPY/HKD.
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3
 Daily FX & Market Commentary
Important Economic Data (Mar 2, 2015 – Mar 6, 2015)

Time Importance Event Period Actual Survey Prior

Monday
03/02/2015 17:00 EC !! Markit Eurozone Manufacturing PMI Feb 51.0 51.1 51.1
03/02/2015 17:30 UK !! Markit UK PMI Manufacturing SA Feb 54.1 53.4 53.1
03/02/2015 18:00 EC ! Unemployment Rate Jan 11.20% 11.40% 11.30%
03/02/2015 18:00 EC !!! CPI Estimate YoY Feb -0.30% -0.40% -0.60%
03/02/2015 21:30 CA ! Current Account Balance 4Q -$13.9B -$12.5B -$9.6B
03/02/2015 21:30 US !! Personal Income Jan 0.30% 0.40% 0.30%
03/02/2015 21:30 US !! Personal Spending Jan -0.20% -0.10% -0.30%
03/02/2015 23:00 US !! ISM Manufacturing Feb 52.9 53.0 53.5
Tuesday
03/03/2015 11:30 AU !!! RBA Cash Rate Target Mar 2.25% 2.00% 2.25%
03/03/2015 21:30 CA !! GDP YoY Dec 2.80% 2.50% 2.00%
Wednesday
03/04/2015 08:30 AU !! GDP YoY 4Q -- 2.60% 2.70%
03/04/2015 17:30 UK !! Markit/CIPS UK Services PMI Feb -- 57.4 57.2
03/04/2015 21:15 US !! ADP Employment Change Feb -- 218K 213K
03/04/2015 23:00 CA !! Bank of Canada Rate Decision Mar -- 0.63% 0.75%
03/04/2015 23:00 US ! ISM Non-Manf. Composite Feb -- 56.5 56.7
Thursday
U.S. Federal Reserve Releases Beige
03/05/2015 03:00 US !! Mar
Book
03/05/2015 20:00 UK ! Bank of England Bank Rate Mar -- 0.50% 0.50%
03/05/2015 20:45 EC !! ECB Main Refinancing Rate Mar -- 0.05% 0.05%
03/05/2015 21:30 US !! Initial Jobless Claims Feb -- -- 313K
03/05/2015 23:00 CA !! Ivey Purchasing Managers Index SA Feb -- -- 45.4
Friday
03/06/2015 18:00 EC !! GDP SA YoY 4Q -- 0.90% 0.90%
03/06/2015 21:30 US !!! Change in Nonfarm Payrolls Feb -- 240K 257K
03/06/2015 21:30 US !!! Unemployment Rate Feb -- 5.60% 5.70%

For any enquiries, please call (852) 2860-0333. Source: Source: Bloomberg L.P.
(K = Thousand, M = Million, B = Billion)
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not intended as an offer or solicitation for the purchase or sale of any security. Information in this document has been prepared without taking account of the objectives, financial situation or needs of
any particular investor. Accordingly, investors should, before acting on the information, consider its appropriateness, having regard to their objectives, financial situation and needs. Any decision to
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recommendations of Citibank (Hong Kong) Limited (“Citibank”) or its affiliates. Although information has been obtained from and is based upon sources that Citibank believes to be reliable, Citi
analysts do not guarantee its accuracy and it may be incomplete and condensed. All opinions, projections and estimates constitute the judgment of the author as of the date of publication and are
subject to change without notice. Prices and availability of financial instruments also are subject to change without notice. Past performance is no guarantee of future results. The document is not to
be construed as a solicitation or recommendation of investment advice. Subject to the nature and contents of the document, the investments described herein are subject to fluctuations in price and/or
value and investors may get back less than originally invested. Certain high-volatility investments can be subject to sudden and large falls in value that could equal the amount invested. Certain
investments contained in the document may have tax implications for private customers whereby levels and basis of taxation may be subject to change. Citibank does not provide tax advice and
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between Citi’s foreign exchange, global macro and technical strategy groups and our developed and emerging markets economists. Under normal circumstances, we expect to present Forecasts on a
monthly schedule although we may offer intra month updates if circumstances dictate. Technical Trend: All views, opinions and estimates derived from CitiFX Technicals (i) may change without notice
and (ii) may differ from those views;, opinions and estimates held or expressed by Citi or other Citi personnel, including Citi Foreign Exchange: Forecast. Should CitiFX Technicals not cover any major
currency pairs, the indication of short-term technical "bullish", "bearish", or "neutral" trends will be based on the result of analysis with various widely known short-term technical analysis tools, namely
RSI, MACD, fibonacci, stochastics, bollinger bands, and simple moving averages.
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