jyske bank jun 24 fx spot on

8/9/2019 Jyske Bank Jun 24 Fx Spot On

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FX SPOT ONFX Research 24 June 2010 Jyske Markets

Publisher:

Jyske Markets

Vestergade 8 -16

DK - 8600 Silkeborg

Analysts:

Helle Varming

+45 89 89 71 [email protected]

Linda Vestergrd

+45 89 89 76 62

Linda.vestergaard

@jyskebank.dk

Kent Bk Iversen

+45 89 89 76 63

Kent_iversen

@jyskebank.dk

Macroeconomic

analyst:

Kim Fster

+45 89 89 71 67

[email protected]

Translation:

Translation Services

Read more FX research

report at

www.jyskemarkets.com

Disclaimer:

Please see the last page

Overall expectations

After a very volatile month in the foreign-

exchange markets in May, volatility in general

abated in June. Panic about the debt crisis in

Southern Europe has subsided, but the subjectis certainly still topical, and it will remain so

for the coming months. The countries in

Southern Europe need to show that they are

actually capable of implementing the pro-

posed budget cuts. That is a time-consuming

process, so there is no hope that market par-

ticipants concern in that respect will evapo-

rate in the near future. It adds to uncertainty

that there are also countries outside Southern

Europe which show vulnerability in respect of

public debt (albeit not to the same extent as

for instance Greece). Therefore focus may well

move from Southern Europe to other regions

at some point. Regular indications that con-

solidation of the public finances is proceeding

according to plan (as happened for Greece on

17 June), would reduce uncertainty. The pre-

vailing uncertainty among investors is also

evident in the fact that the foreign exchange

markets tend to be very sensitive to politi-

cally-motivated announcements. That is what

happened at the beginning of June when an-

nouncements by the Hungarian government,

which had just taken up office, comparing

Hungary with Greece, caused havoc in the for-

eign-exchange markets.

Because of the sharp focus on the debt prob-

lems in Southern Europe, economic indicators

have been of little importance to the foreign-exchange markets for some time. Now that

panic about Southern Europe has abated, we

shall probably see the economic indicators

gaining more importance even in a situation

of high uncertainty. At such a time it is impor-

tant to remember the message that the global

upswing remains intact - despite the problems

in Southern Europe (read more in Upswing

still intact despite debt turmoil.

Risk scenarios

The greatest risk to global growth lies in a

flare-up of the financial crisis in the wake of

the Greek crisis. This might be sparked if one

or more of the Southern European countries

were to default or to apply for debt restruc-

ture. In spite of the rescue package, this sce-

nario might still be the case for Greece, and

several other Southern European countries are

at risk. Debt restructure would hit the Euro-

pean banks hard, since they hold large portfo-

lios of government bonds issued by the South-

ern European countries.

- We hope you will enjoy reading FX - SPOT ON -

An overview An overview

Overall expectations and risk scenarios

FX outlook

yske Bank's FX forecasts

The past month in review

The development in the markets over the past month

This months special report

Upswing still intact - despite debt turmoil

FX overview

USD, GBP, CHF, JPY, NOK, SEK, CZK, PLN, HUF, TRY, MXN, BRL, ZAR og CNY

FX forecasts including consensus estimates

How do Jyske banks forecasts deviate from consensus?

Economic forecasts

yske Banks forecast for other assets traded

Page 1

Pages 2-3

Page 4

Pages 5-6

Pages 7-23

Pages 24-25

Page 26

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Majors & ScandiesCentral-bank

rate

Against

EUR USD DKK GBP*

EUR

Spot 1.00% - 1.23 7.44 1.21

3M 1.00% - 1.20 7.45 1.20

6M 1.00% - 1.17 7.45 1.22

12M 1.00% - 1.27 7.45 1.25

USD

Spot 0-0.25% 1.23 - 6.06 1.49

3M 0-0.25% 1.20 - 6.21 1.45

6M 0-0.25% 1.17 - 6.37 1.43

12M 0.50% 1.27 - 5.87 1.59

GBP

Spot 0.50% 0.83 1.49 9.01 -

3M 0.50% 0.83 1.45 8.98 -

6M 0.50% 0.82 1.43 9.09 -

12M 1.00% 0.80 1.59 9.31 -

JPY

Spot 0.10% 111 90.45 6.70 134.55

3M 0.10% 110 91.67 6.77 132.53

6M 0.10% 115 98.29 6.48 140.24

12M 0.10% 120 94.49 6.21 150.00

CHF

Spot 0-0.75% 1.3601 1.11 5.47 1.65

3M 0-0.75%

See report:CHF: Still moving upwards6M 0-0.75%

12M 0-1.00%

NOK

Spot 2.00% 7.95 6.47 0.94 9.62

3M 2.00% 8.00 6.67 0.93 9.64

6M 2.25% 7.95 6.79 0.94 9.70

12M 2.75% 7.90 6.22 0.94 9.88

SEK

Spot 0.25% 9.53 7.75 0.78 11.54

3M 0.50% 9.50 7.92 0.78 11.45

6M 1.00% 9.40 8.03 0.79 11.46

12M 1.50% 9.35 7.36 0.80 11.69

DKK

Spot 1.05% 7.44 6.06 - 9.01

3M 1.05% 7.45 6.21 - 8.98

6M 1.05% 7.45 6.37 - 9.09

12M 1.15% 7.45 5.87 - 9.31

Note: All the exchange rates are quoted in accordance with inter-bank conventions except for the columnmarked (*) which has GBP as the base currency

Source: Bloomberg/Jyske Bank

Jyske Bank's FX forecasts

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https://jyskebank.com/wps/wcm/connect/b9b8fc0042f43a7886edefb6d1c19027/336658_CHFPilenpegerfortsatopad.pdf?MOD=AJPERES&CACHEID=b9b8fc0042f43a7886edefb6d1c19027https://jyskebank.com/wps/wcm/connect/b9b8fc0042f43a7886edefb6d1c19027/336658_CHFPilenpegerfortsatopad.pdf?MOD=AJPERES&CACHEID=b9b8fc0042f43a7886edefb6d1c19027https://jyskebank.com/wps/wcm/connect/b9b8fc0042f43a7886edefb6d1c19027/336658_CHFPilenpegerfortsatopad.pdf?MOD=AJPERES&CACHEID=b9b8fc0042f43a7886edefb6d1c19027https://jyskebank.com/wps/wcm/connect/b9b8fc0042f43a7886edefb6d1c19027/336658_CHFPilenpegerfortsatopad.pdf?MOD=AJPERES&CACHEID=b9b8fc0042f43a7886edefb6d1c19027


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Emerging MarketsCentral-bank

rate

Against

EUR USD DKK GBP*

CZK

Spot 0.75% 25.68 20.86 0.29 31.16

3M 0.75% 25.60 21.33 0.29 30.84

6M 0.75% 25.50 21.79 0.29 31.10

12M 0.75% 25.50 20.08 0.29 31.88

PLN

Spot 3.50% 4.08 3.31 1.83 4.95

3M 3.95 3.29 1.89 4.76

6M 3.90 3.33 1.91 4.76

12M 3.80 2.99 1.96 4.75

HUF

Spot 5.25% 280.56 227.89 0.27 340.50

3M 5.25% 280 233 0.27 337.35

6M 5.25% 270 231 0.28 329.27

12M 5.25% 270 213 0.28 337.50

TRY

Spot 7.00% 1.94 1.57 3.84 2.35

3M 7.00% 1.86 1.55 4.01 2.24

6M 8.00% 1.76 1.50 4.25 2.14

12M 9.50% 1.84 1.45 4.05 2.30

MXN

Spot 4.50% 15.59 12.66 0.48 18.92

3M 4.50% 15.30 12.75 0.49 18.43

6M 4.50% 14.63 12.50 0.51 17.84

12M 14.92 11.75 0.50 18.65

BRL

Spot 10.25% 2.20 1.79 3.38 2.67

3M 11.75% 2.20 1.83 3.39 2.65

6M 12.50% 2.11 1.80 3.54 2.57

12M 2.16 1.70 3.45 2.70

ZAR

Spot 6.50% 9.29 7.55 0.80 11.28

3M 6.50% 9.20 7.67 0.81 11.1

6M 6.50% 9.10 7.78 0.82 11.1

12M 9.00 7.09 0.83 11.3

CNY

Spot 5.31% 8.39 6.81 0.89 10.18

3M 8.04 6.70 0.93 9.69

6M 7.72 6.60 0.96 9.42

12M 8.19 6.45 0.91 10.24

Note: All the exchange rates are quoted in accordance with inter-bank conventions except for the columnmarked (*) which has GBP as the base currency


Jyske Bank's FX forecasts cont.

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4/29


By Helle Varming

Pressure on EUR has eased a bit

Generally the sentiment in the financial markets

has improved throughout June, and volatilities

have been on the decrease. However, in mid-

June a spokesperson from the Hungarian

government compared Hungary to Greece, and

therefore nervousness re-emerged and put

EUR/USD under pressure. The Hungarian

government was, however, quick at quieting

down things and therefore the statements never

triggered any actual panic. The market reactions

revealed that investors are still very jittery, but

despite this, the VIX index has fallen decently

over the last weeks of June. The improving

sentiment also somewhat eased the pressure on

EUR/USD, which at this point in time is more or

less unchanged relative to the level at which it

opened at the beginning of the month.

GBP develops favourably but debt weighs

In early June, GBP saw some support when it

became clear that the British insurance company

Prudentials purchase of the US AIG Asia would

not materialise after all. The economic situation

of the UK, with a growing budget deficit and a

massive debt burden, did however, put a damper

on the potential offered by GBP, as investors

feared the rating agencies would downgrade

their credit rating of the UK. However, all other

things being equal, the early reactions - after the

publication of the UK crisis budget on 22 June -

were encouraging and thus GBP found further

support. So far, pound sterling has appreciated

by just above 2% against the euro this month.

JPY at the mercy of the markets

In mid-June, political uncertainty in Japan

resulted in pressure on the yen as Prime Minister

Hatoyama had to resign due to political friction

in Japan. To a great degree, however, the general

market sentiment has governed the

development of the Japanese yen, and even

though the sentiment has improved slightly in

recent days, the uncertainty in the markets has

after all kept the yen at fairly high levels. HenceEUR/JPY is currently almost 1% lower than at the

beginning of the month.

Swiss franc continues to increase

The interest-rate meeting of the Swiss National

Bank turned out to be a milestone event and our

scenario of a possible shift to a higher level has

not become less likely. The interest rates may

have been kept unchanged, but SNBs

subsequent comment did not contain the well-

known remark that it would 'prevent any excess

strengthening of the Swiss franc'. Instead the

SNB said that it would intervene if the

appreciation again becomes a problem in

respect of renewed risk of deflation but stated

also that the threat of deflation has generally

been eliminated. These comments offereddecent support to the Swiss franc (which had

already begun to increase), and so far this

month the currency has strengthened by almost

6% against the euro.

Little news from Scandinavia

Generally the general market sentiment defined

the direction for the Scandinavian currencies

this past month, and generally we have seen

minor fluctuations for the Norwegian krone as

well as the Swedish krona. In mid-June, centralbank governor Ingves stated that the Swedish

economy is on such a strong footing that

Sweden has weathered the worst part of the

crisis. This offered support to the Swedish krona

for a short while, but compared to the levels at

the beginning of the month both the Norwegian

krone and the Swedish krona are so far at more

or less unchanged levels against the euro.

Chart 1: Selected currencies (1 June2010 = 100)

The past month in review

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5/29


By The Macro Team

The upswing is strengthening and has spread

extensively. There are, however, considerable

differences between the pace of the economic

growth in the various countries. We maintain

our expectations of solid growth until the

autumn; we expect that subsequently the pace

will fall to a level somewhat below the normal

level. But the risk of lower-than-expected

growth has increased. The reasons are risks

threatening the upswing in this early phase,

including turbulence in the financial markets,

fiscal tightening and transition from stimuli-

fuelled growth to consumption- and

investment-fuelled growth. We now expect

that the first interest-rate hikes on the part of

the central banks in the US, the euro zone and

the UK will take place later than we previously

estimated.

Solid growth scenario with cracks

Growth is strong in EM Asia and Latin America

and quite solid in the US and Japan. On the

contrary, the progress in the euro zone is

somewhat more modest, prospects are that the

euro zone will lag further behind. Also within the

euro zone, there are big differences in the

growth pace from Southern Europe close to

sliding into recession to Northern Europe with

growth slightly below the normal level.

Global trade

Kilde: Reuters EcoWin & CPB

01 02 03 04 05 06 07 08 09

90

100

110

120

130

140

150

160

170

Indeks

90

100

110

120

130

140

150

160

170

Also the sectors vary considerably. We have

everything from the bubbling manufacturingindustry, a solid service sector to construction

characterised by post-traumatic stress. The

progress in industry is reflected in the global

trade. Trade now increases faster than during

the upswing in the period 2004-07 when we saw

the strongest growth since the early 80s.

Upswing in a new phase

Economic growth is still primarily based on

expansive fiscal and monetary policies as well as

inventory adjustment. However, the most recent

announcement from the G20 countries did show

that a shift is in the offing from an expansive

fiscal policy to stronger focus on tightening in

countries with a risk of unpleasant debt

dynamism. Also, prospects are that inventory

adjustment will offer less support. Therefore we

are nearing the time where consumer spending

and investment must take on the role as growth

engines for the upswing.

GDP growth

88

90

92

94

96

98

100

102

104

106

88

90

92

94

96

98

100

102

104

106

04 05 06 07 08 09 10 11

Indeks100=2

008:1

Euroland Japan USA

Stiplede linjer er Jyske Banks forventninger

Source: Reuters EcoWin og Jyske Bank

Boosting consumer spending

Compared with previous upswings, consumer

spending in the large industrialised countries

has so far been fairly modest. The reason is

undoubtedly the problems that consumers have

had in the form of capital losses, steep declines

in employment and rising unemployment.

Yet there are signs that these difficult conditions

are about to turn around. We have seenindications of slightly increasing house prices

and stabilising unemployment rates in various

places in the world. As the recession has been

Upswing still intact - despite debt turmoil

5/29


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extraordinarily long, we may see accumulated

demand in some countries that may boost

consumer spending. We do, however, expect

only a moderate upswing in consumer spending

as there will still be focus on saving andreduction of debt.

Prospects of increasing investments

Most countries still have ample of available

production capacity. However, quite a few EM

countries are facing capacity problems. The

steeply rising industrial production and

international trade support the need for

corporate investments. And indeed, the

businesses are seeing prospects of rising profits,

and the low interest rates also supportinvestment. On the other hand, there is still

focus on debt reduction. On the whole, we are

seeing increasing investment.

Higher demands on fiscal policy

Due to heavy budget deficits and steeply rising

national debts, there is focus on tightening of

the fiscal policy. These problems have been

aggravated due to the financial turbulence in

Southern Europe. Fiscal tightening will put a

damper on economic growth, but this will

primarily take place in 2011.

Fiscal policy rather than monetary policy

Fiscal tightening may to some extent replace

some of the interest-rate hikes that the central

banks would otherwise have implemented.

Another thing that may postpone any interest-

rate hikes is the development of inflation. It has

decreased considerably in several industrial

countries and is nearing a disturbingly low level.

Moreover, core inflation will normally fall at the

beginning of an upswing and therefore the

overall inflation may become even lower. Thisapplies to the US, the euro zone and the UK, and

therefore we now think the first interest-rate

hikes in these countries will be implemented

later than we thought previously.

Highest risks on the downside

The transition from an upswing fuelled by

temporary stimuli to one fuelled by consumer

spending and investments may result in a

slowdown in growth. The most recent financial

turbulence increases the risk of lower growth.

Particularly if it affects the global consumer and

business confidence that is important for

consumer spending and investment. Also, it will

also be a problem if due to the financial turmoil

the markets freeze. The renewed focus on fiscal

sustainability may trigger excessive tightening.

Particularly if at the same time the EM countries

in Asia initiate tightening measures, it may

dampen the economy too much and hence

weaken the global economy. There is, however,

also a risk that growth may be boosted to much

by accumulated consumer demand and need forinvestment.

Read more about Jyske Banks most recent macro-

economic forecast in the research reportUpswing

intact - despite debt turmoil

GDP estimates, %

2008 2009 2010* 2011*

The US 0.4 -2.4 3.2 (3.0) 2.9 (3.0)

Japan -1.2 -5.3 3.3 (1.7) 1.9 (1.7)

The eurozone 0.6 -4.1 1.0 (1.1) 1.4 (1.5)

The UK 0.5 -4.9 1.2 (1.3) 1.7 (1.8)

Sweden -0.6 -5.1 3.2 (1.7) 2.4

Norway 2.0 -1.5 1.9 (2.4) 2.6

Switzerland 1.8 -1.5 2.0 (1.9) 2.0

Emerging Markets

Latin America 4.4 -1.8 5.4 (4.1) 4.1 (3.9)

Central and Eastern

Europe

4.2 -5.5 4.1 (3.3) 4.1

Asia 6.9 5.7 8.4 (7.9) 7.6

* Estimates (from the previous edition of Global Economy in brackets)

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7/29


By Helle Varming

US dollar - USD

The panic about the debt crisis in Southern Europe

has waned somewhat since our last issue of FX

Spot On, and the euro has rallied slightly. However,

anxiety is just below the surface, and Spain and the

Spanish financial sector in particular have at-

tracted the interest of market participants for the

past weeks. Despite attempts at denial on the part

of official sources, market participants have been

wondering whether the Spanish government was

preparing to ask for economic assistance. If uncer-

tainty about Spain grows, this may scupper theyoung optimism in the financial market and may

put renewed pressure on the euro against the US

dollar. Moreover, anxiety may flare up again when

regular evaluations of the fiscal-policy attempts of

the euro countries become available. The euro has

taken heavy beatings through the first six months

of 2010. Fundamentally, there is is much to indi-

cate that the road ahead may hold rough spots yet

- for the ongoing debt crisis in the euro zone is still

fraught with uncertainty. Other things being equal,

this will tend to maintain pressure against the

single currency. Moreover, the upswing in the euro

zone is lighter than what we are seeing in the rest

of the world, and several countries in Southern

Europe are still threatened by recession. Therefore

we do not find it likely that the European Central

Bank will raise interest rates until June 2011,

whereas the Fed will probably act already in March.

Other things being equal, this indicates that the

dollar will strengthen a little more against the euro

over the coming months although not at the

speed which we have seen earlier. If the news flow

should suddenly present an overweight of bad

news for the dollar, there is a risk that the dollar

weakening we expect in the latter half of our esti-

mate period will suddenly materialise. A record-

high number of investors are positioned for addi-

tional weakening of the euro against the dollar,

and that increases the risk of a sharp movement if

market focus suddenly moves from the debt-ridden

euro zone to the growing debt burdens across the

Atlantic. However, at present we expect it to be

quite some time until fiscal-policy tightenings and

the public debt burden of the US hit the headlines

in earnest. Still, the spotlight might be directed at

the issue towards the US mid-term elections in

November.

Estimate - EUR/USD:

3M: 1.20

6M: 1.17

12M: 1.27

Pound Sterling - GBP

The predominant issues with regard to sterling

are still the huge public-sector deficits and the

growing debt burden. The most important task

for David Camerons new government is there-

fore to get the public finances back to a sustain-

able level. The long-awaited austerity budget,

which was announced on 22 June, was wel-

comed by the financial markets and helped to

support sterling. The budget is actually quite

ambitious, involving additional savings totalling

1.9% of GDP until 2015 as well as a VAT increase

from 17.5% to 20%, and obviously the govern-

ment wanted to signal that it will work ex-

tremely hard to balance the public finances.

After the announcement, the rating agency Fitch

stated that the budget constitutes a strong

policy statement and an ambitious plan to re-

duce the budget deficit. Moreover, Fitch indi-

cated that the budget will raise confidence in the

UK and emphasise its AAA status. As stated, the

budget offered support to GBP, but so far we

have not seen any actual enthusiasm. The UK

will be in for quite a job and the coming years

will show whether the economic cure in combi-

nation with global growth will suffice to save the

economy in the long term. Moreover, we do not

yet know whether the fiscal tightening and its

dampening effect on economic activity will af-fect the Bank of Englands monetary policy. We

still expect that GBP will appreciate over the

coming year, but we also think the uncertainty

indicates that progress will take place gradually.

Estimate - EUR/GBP:

3M: 0.83

6M: 0.82

12M: 0.80

In short

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8/29


Swiss franc - CHF

The Swiss franc is still gaining value, and our

scenario of a possible shift to a higher level has

not become less likely after the Swiss National

Banks interest-rate meeting in June. The SNB

left interest rates unchanged, but its subsequent

comment did not contain the well-known remark

that it would prevent any excess strengthening

of the Swiss franc. Instead the SNB announced

that it would intervene if the appreciation again

becomes a problem in relation to renewed risk of

deflation, but also stated that the threat of de-

flation has generally disappeared. Other things

being equal, this indicates that at this point in

time, the SNB is not very concerned that a CHF

appreciation may have serious consequences forthe domestic economy, and given these signals

there is every indication that CHF will appreciate

further. So for the time being, the SNB is leaving

interest rates unchanged due to the uncer-

tainty relating to the debt crisis in Southern

Europe. There is, however, a risk that before long

the SNB will begin to tighten its policy as the

development in the domestic economy in isola-

tion indicates that an interest-rate hike may be

appropriate. If this risk materialises, we see yet

another factor supporting the currency. On thewhole, we find much to indicate a stronger CHF,

and in our view the latest signals from the SNB

support the scenario we set up earlier that the

CHF is shifting to a different trading range. From

the technical point of view, there is support of

the EUR/CHF rate at around 136 for the short

term, but more and more things indicate that we

may see a test of 134.80.

Read more about the risk of a shift to a new level

in the analysisRisk of CHF appreciating further.

Japanese yen - JPY

The combination of a weakening euro and grow-

ing risk aversion in the markets has boosted the

yen for months. In recent weeks fears about a

euro-zone collapse have abated somewhat, and

the VIX index (which indicates the general risk

aversion in the markets) has been falling. Anxi-

ety is still not far away, and the more optimistic

undertone we have seen in the markets lately

still appears fragile. So far, we maintain our

estimate of the 3M EUR/JPY rate at 110. Still, inour view the anxiety that has characterised the

markets for the past months is merely a correc-

tion. Accordingly, we expect anxiety to decrease

further. Other things being equal, this will mean

that pressure against the yen will grow as inves-

tor appetite for risky assets increases. Another

thing in favour of a yen weakening over time is

the deflation spectre which acts as a heavy

damper on the Japanese economy. Although the

economic growth rate has been fairly high for

recent quarters, Japan has again had to struggle

with the deflation spectre, and in our view this

means that there are no prospects of interest-

rate hikes in Japan until some time in 2012.

Economies elsewhere in the world are still show-

ing signs of progress, and even if there are no

interest-rate hikes in the pipeline, for instance in

the US, the Fed is likely to begin to tighten itsmonetary policy in early 2011. The prospect of a

widening of the yield spread to the US, among

other countries, will add to the pressure against

the yen particularly towards the end of our

estimate period.

Estimate - EUR/JPY:

3M: 6,77 (110)

6M: 6,48 (115)

12M: 6,21 (120)

Norwegian krone - NOK

Increased anxiety among investors occasioned

by the debt crisis in the euro zone has abun-

dantly demonstrated that NOK is probably still

sensitive to higher risk aversion in the markets.

Overall, NOK is still supported to some extent by

healthy fundamentals and in particular by the

gradual tightening by Norges Bank of its mone-

tary policy. On earlier occasions we have argued

that the potential of NOK would probably be

relatively little among other things because

the exchange rate is by now back at pre-crisislevels, and because the focus on NOK is likely to

weaken when the worlds other central banks

begin to raise interest rates. To this should be

added the fact that the economic indicators

were somewhat disappointing at the beginning

of 2010, and that Norges Bank in its latest

monetary-policy report lowered its expectation

of interest rates to a single hike in the second

half of 2010. This bears out our expectation

expressed earlier that the potential of NOK will

be smaller this year than it was in 2009.Overall, we still expect NOK to be stable to

slightly stronger during our estimate period, but

8/29
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9/29


if anxiety in the financial markets intensifies,

NOK may again suffer a blow.

Estimate - EUR/NOK:

3M: 8.006M: 7.95

12M: 7.90

Swedish krona - SEK

The krona is still showing signs of weakness

when sentiment in the markets is depressed.

Although panic about the debt crisis in the euro

zone has abated somewhat, there is a risk that

anxiety may flare up now and then particularly

during the coming months and put pressure on

SEK. Unless the prevailing unrest in the markets

turns into stark panic, we find that SEK is likely

to find some support in the prospect of an early

interest-rate hike by the Riksbank. GDP growth

proved very high at the beginning of this year,

and the economic growth rates for Q2-Q4 2009

were subject to significant upward revisions.

This caused Jyske Banks macro economists to

raise their growth estimate for 2010 from 1.7%

to 3.2%. Indeed, several members of the Riks-

bank have made optimistic announcements

about the prospects of the Swedish economy,

and lately central bank governor Ingves stated

that the economy is on such a strong footing

that Sweden has weathered the worst part of the

crisis.

Other things being equal, it seems as if the Riks-

bank will begin to tighten its monetary policy,

and in our opinion, the first interest-rate hike

will be made after the monetary-policy meeting

on 1 July. However, there are many points of

uncertainty about the Swedish economy (among

other things the prevailing debt crisis in the euro

zone), and this fact indicates that the Riksbank

will only raise interest rates gradually, taking

the repo rate to 1.75% a year from now. All

things considered, the Swedish economy has

progressed well, and now that anxiety in the

markets seems to have abated somewhat, much

indicates that the value of SEK will continue to

edge up. But the EUR/SEK rate is almost back to

its old trading range from before the outbreak ofthe financial crisis, and we therefore do not ex-

pect SEK to strengthen significantly. Still, in view

of the more positive undertone in the markets in

general and the better prospects of growth in

particular, we have decided to raise our estimate

of SEK slightly.

Estimate - EUR/SEK:

3M: 9.50

6M: 9.40

12M: 9.35

9/29


10/29


By Helle Varming

Country facts GDP and inflation (y/y)Per capita GDP (USD, 2008) 47,393

GDP growth (Q1 2010 (q/q)) 0.8%

Inflation (March 2010 (y/y)) 2.0%

Unemployment 9.7%

Central-bank rate 0-0.25%

Current account (% of GDP (2008)) -4.9%

Public debt (% of GDP (2008)) 70.4%

The worlds largest economy and one of the worlds highest GDP per capita. The largest trading partners are (%

of exports): Canada (20.1%), Mexico (11.7%) and China (5.5%). The large industries in the US include oil, steel,

auto and air transport. US GDP per sector: Service (79.6%), Manufacturing industry (19.2%), Agriculture (1.2%).

USD/DKK incl. forecast and forward rates Current account (C/A)

Current Account Current Account % GDPSource: Reuters EcoWin

80 85 90 95 00 05

%GDP

-7

-6

-5

-4

-3

-2

-1

0

1

Billion

USD

-225

-200

-175

-150

-125

-100

-75

-50

-25

0

25

Fundamental valuation Investment case

Based on the purchasing power parity, USD is

slightly undervalued (by about 1.5%) equilibrium

around 1.21 (EUR/USD) and 6.15 (USD/DKK).

We expect US growth to be markedly higher than

eurozone growth (at least twice as high) in both

2010 and 2011.

Interest-rate hike from the Fed in March 2011. ECB

will wait until June 2011.

The debt crisis in the euro zone and the need for

fiscal-policy tightening may have an adverse effect

on growth in the euro zone.

The debt crisis in Southern Europe and the

uncertainty about its consequences for growth will

also burden EUR over the coming months.

Relatively better prospects for the US economy will

support USD.

The yield spread will narrow in favour of USD over

the coming quarters.

USD is still in a technical uptrend.

Price triggers Risk factors

Relatively better growth data from the US

compared with the euro zone.

Narrowing of credit spread between Europe and

the US in the short end of the yield curve (up to 2Y)

will support USD.

Continuing nervousness that the Greek disease

will spread to e.g. Spain will put pressure on

EUR/strengthen USD until matters will be clarified

The Fed is setting the scene for a normalisation of

the monetary policy (e.g by removing the promise

to keep interest rates low and withdrawing

quantitative easing).

For the short term: risk of USD weakening since

the strengthening has been solid and the market is

stretched.

Decreasing concern about the situation in

Southern Europe may result in a EUR comeback.

Need for fiscal-policy tightening in the US may

delay the first interest-rate hike.

Any problems selling government bonds in the US

may put USD under pressure.

Doubt about the status of USD as a reserve

currency may enhance the pressure on USD.

US dollar - USD

10/29


11/29


By Helle Varming

Country facts GDP and inflation (y/y)

Per capita GDP (USD, 2008) 43,736

GDP growth (Q1 2010 (q/q)) 0.3%


Unemployment 7.9%

Central-bank rate 0.5%



The UK has one of the largest economies in Western Europe and is Europe financial centre. The largest trading

partners are (% of exports): The US (13.1%), Germany (11.5%), The Netherlands (7.8%). Banking and insurance

services make up the largest part of GDP: Service (80.4%), Manufacturing industry (18.2%), Agriculture (1.4%).

USD/DKK incl. forecast and forward rates Current account (C/A)


GBP is undervalued by approx. 14% based on thepurchasing power parity equilibrium is approx.

0.73 (EUR/GBP) and 10.19 (GDB/DKK).

The upturn in the UK is still weak and massivesavings of public budgets will over the coming

years slow down growth further.

Inflation and inflation anticipations are, however,rising and this leaves BoE in a dilemma.

We expect a stable to slightly stronger GBP overthe coming months. The greatest potential in GBP

is some months ahead.

The end to quantitative easing and an interest-rate hike from the BoE in February 2011 (ECB will

wait until June 2011) will support pound sterling.

A gradual improvement of the economy andclarification about the new governments fiscal

line will reduce uncertainty related to sterling and

the risk premium in the long term.


A widening of the yield spread to the euro zone (2Yand 10Y) will support sterling.

Economic indicators improve and the upturn gainsmomentum.

An end to the quantitative easing which keepsmarket rates artificially down.

Inflation will be more sustainable and hikes will bemade sooner than expected.

The UK falls back into recession and interest ratesremain low for a longer period than expected.

An escalation of the financial crisis may result in ahigh risk premium on GBP due to the exposure to

the financial sector in London.

Renewed uncertainty about the sustainability ofthe UK economy may raise doubt whether the UKwill be able to maintain its current credit rating.

The euro-zone countries succeeded in putting adamper on the worse uncertainty and EUR is lifted.

Pound Sterling - GBP

11/29


12/29


By Helle Varming



GDP growth (Q1 2010 (q/q)) 0.4%

Inflation (May 2010 (y/y)) 1.1%

Unemployment 3.8%

Central-bank rate 0-0.75%

Current account (% of GDP (2008)) 2.4%


Switzerland has a wealthy and stable economy with GDP per capita among the highest in the world. The largest

trading partners (% of exports): Germany (33.3%), Italy (11%), France (9.4%). Important industries: machines,

watches, bank and insurance. GDP per sector: Service (73%), Manufacturing industry (23%), Agriculture (4%).

Risk of further CHF appreciation

Our scenario of an upward shift to a new level in the Swiss franc is still relevant (see

the research reportRisk of CHF appreciating furtherfrom 20 May).

At the June meeting, the Swiss National Bank (SNB) did maintain its rate, but its

subsequent comment did not contain the by now so well-known remark that it would

'prevent any excess strengthening of the Swiss franc'.

Instead the SNB said that it would intervene if the appreciation becomes a problem

again in respect of renewed risk of deflation.The SNB stated also that the threat of deflation has generally been eliminated.

This indicates that at this point in time, the SNB is not overly concerned that an

appreciation of the franc will have serious consequences for the economy, and with

these signals there is every indication that the franc will appreciate further.

The debt crisis in Southern Europe has so far prompted the SNB to leave interest rates

unchanged but seen in isolation developments in the domestic economy indicate that a

hike may soon be appropriate. When the SNB indicates a tightening of its monetary

policy, it will be another supportive factor for the currency.

Fundamentally, there are many indications of a stronger franc for the period ahead.

Technically, EUR/CHF is in a downtrend with resistance at the moment around 140 and

for the short term around 136-136.50.

It appears increasingly likely that we will see a test of 134.80 in EUR/CHF.

There are thus still many indications of a shift to a new level for the Swiss franc where

the new, strong level is maintained for both the short and long term.

Investors should therefore use corrections towards 140 in EUR/CHF to close Swiss

franc funding.

The new major range in EUR/CHF is now 122-140.

Link to research report in PDF-version including charts

Swiss franc CHF

12/29
http://www.jyskebank.dk/_jb/commoninc/bin.asp?id=279700&src=schweizerfrancchf.pdfhttp://www.jyskebank.dk/_jb/commoninc/bin.asp?id=279700&src=schweizerfrancchf.pdfhttp://www.jyskebank.dk/_jb/commoninc/bin.asp?id=279700&src=schweizerfrancchf.pdfhttps://jyskebank.com/wps/wcm/connect/b9b8fc0042f43a7886edefb6d1c19027/336658_CHFPilenpegerfortsatopad.pdf?MOD=AJPERES&CACHEID=b9b8fc0042f43a7886edefb6d1c19027https://jyskebank.com/wps/wcm/connect/b9b8fc0042f43a7886edefb6d1c19027/336658_CHFPilenpegerfortsatopad.pdf?MOD=AJPERES&CACHEID=b9b8fc0042f43a7886edefb6d1c19027http://www.jyskebank.dk/_jb/commoninc/bin.asp?id=279700&src=schweizerfrancchf.pdf


13/29


By Helle Varming



GDP growth (Q1 2010 (q/q)) -2.3%

Inflation (April 2010 (y/y)) -1.2%

Unemployment 5.1%




In terms of GDP (PPP), Japan is the worlds third largest economy next to the US and China. The largest trading

partners (% of exports): The US (17.8%), China (16%), South Korea (7.6%). Japan produces: motorcycles,

electronics, ships and chemicals. GDP per sector: Service (66.4%), Manufacturing industry (27.9%), Agriculture

JPY/DKK incl. forecast and forward rates Current account (C/A)


Based on purchasing power parity, JPY isovervalued equilibrium around 1.48 (EUR/JPY).

Growth declines e.g. the effect from the fiscal-policy easing fades away.

A number of factors puts a damper on growth,including the need to consolidate the public

finances, which are in a sorry state.

Deflation is again a reality in Japan, and in ourview this means that interest-rate hikes will not be

on the agenda until 2012 at the earliest.

We expect a yen weakening for the long term. Japan may look forward to a battle against

deflation until end-2011. The BoJ will not tighten

its monetary policy until 2012 at the earliest.

We expect, however, that the other G10 centralbanks will start tightening their monetary policyearly next year (BoE in February and Fed in March

2011).

A widening of the yield spreads will squeeze theyen.


Increased appetite for risky assets. A widening of the yield spread between Japan and

the other G10 nations gives renewed focus on the

yen as a funding currency.

Renewed focus on the possibility of interventionmay put pressure on the yen.

The BoJ will increase the purchase of governmentbonds (extend the quantitative easing). Focus on the development in public debt (close to

200% of GDP) creates distrust in JPY.

Renewed outbreak of risk aversion due e.g. to thedebt crisis in the euro zone

The global crisis is slow in progress and thenormalisation of the interest-rate levels in the

other G10 countries is long in coming.

Technical breach of 108 for EUR/JPY may pave theway for further strengthening of JPY down towards100.

apanese yen - JPY

13/29


14/29


By Helle Varming



GDP growth (Q1 2010 (q/q)) 0.1%


Unemployment 3.7%




Norway has a solid and wealthy economy and one of the worlds highest per capita GDP. The largest trading

partners are (% of exports): The UK (27%), Germany (12.8%), The Netherlands (10.4%). Main industries: oil, gas,

shipbuilding and chemicals. GDP per sector: Service (76%), Manufacturing industry (21.1%), Agriculture (2.9%).

NOK/DKK incl. forecast and forward rates Current account (C/A)


NOK is slightly undervalued with respect topurchasing power parity equilibrium 7.80

(EUR/NOK) and 95.4 (NOK/DKK).

The upswing in Norway has begun. Norges Bank has begun the normalisation of the

interest-rate level and has already hiked three

times by a total of 75 bp to 2% since October.

We expect growth of 1.9% and 2.6% in 2010 and2011, respectively, and we expect further hikes

totalling 100 bp to 3% at 12-months' term.

The krone has already strengthened somewhatover the past twelve months.

We believe in a stable to weak positivedevelopment in NOK over the coming year, as

Norges Bank will raise interest rates further, while

the majority of the other G10 central banks will

remain reluctant.

NOK has already strengthened by 15% in 2009,and we therefore assess that the potential will be

more limited in 2010 (2-3% over the year).


Increased appetite for risky assets will supportNOK.

Further widening of the yield spread betweenNorway and the other G10 nations supports NOK

since the prospect of a positive return supports

the demand for NOK.

Any rises in the oil price may support NOK.

The NOK strengthening may prompt Norges Bankto postpone the hikes to help the weak

manufacturing industry to get back on track.

Growth has disappointed in early 2010 and if thistrends continue it may have consequences for

Norges Banks future interest-rate path.

A possible deterioration of the sentiment in thefinancial markets may put pressure on NOK.

Norwegian krone - NOK

14/29


15/29


By Helle Varming


GDP growth (Q1 2010 (q/q)) 1.4%


Unemployment 8.8%




The Swedish economy has been hit hard by the global crisis but is slowly recovering. The largest trading partners

are (% of exports): Germany (10.4%), Norway (9.5%) Denmark (7.4%). Iron, steel, defence equipment and

automotive are the largest industries. GDP per sector: Service (70.5%), Manufacturing industry (28%),

EUR/SEK incl. forecast and forward rates Current account (C/A)


SEK is undervalued based on purchasing powerparity equilibrium 7.60 (EUR/SEK).

The upswing will begin in 2010 after the deeprecession.

Consumers are still optimistic and the industryand the export are now also improving.

We expect growth in Sweden of 3.2% and 2.4% in2010 and 2011, respectively (we believe euro zone

growth will be 1-1.5% for the same period).

We expect the Riksbanken to begin to raiseinterest rates in July 2010 (ECB waits until mid-

2011).

Riksbanken has indicated that interest rates willbe hiked during the summer or early autumn.

The strong growth in early 2010 indicates aninterest-rate hike in July.

We expect that the difference in growth betweenSweden and the euro zone will be in favour of

Sweden.

The yield spread (2-year swap spread) to the eurozone will develop in favour of Sweden over the

coming quarters, and this will support the SEK.


Increased appetite for risky assets will supportSEK.

Signals from the Riksbanken of a furthertightening of the monetary policy and an early

normalisation of the interest-rate level.

Positive surprises with respect to economicindicators both globally and locally (including

continuing improvements in exports).

An outbreak of risk aversion in the financialmarkets (e.g. based on a government-debt crisis).

The global upturn loses momentum, and theSwedish economy is put under renewed pressure.

Market rates reflect expected hikes of up to 75 bpin H2. Risk of disappointments if the crisis in the

euro zone escalates.

Swedish krona - SEK

15/29


16/29

FX SPOT ONFC Research 24 June 2010 Jyske Markets

By Linda Vestergaard



GDP growth (Q4 2009 (q/q)) 0.5%

Inflation (April 2010 (y/y)) 1.2%

Unemployment 8.7%




Compared with the other former communist states, the Czech Republic is the most stable and wealthy economy.

The largest trading partners are (% of exports): Germany (30.3%), Slovakia (6.6%), Russia (6.2%). Primary

industry: auto, metal and machinery. GDP per sector: Service (56.2%), Manufacturing industry (37.6%),

Agriculture (2.3%).

CZK/DKK incl. forecast and forward rates Current account (C/A)


96 98 00 02 04 06 08

%GDP

-8

-7

-6

-5

-4

-3

-2

-1

0

1

2

3

Billion

CZK

-45

-40

-35

-30

-25

-20

-15

-10

-5


The Czech Republic was also hit by the global

economic slowdown, but now the Czech economy

is beginning to show signs of growth. The activity

level in the Czech Republic is still relatively low.

The Czech Republic is a very open economy. A large

share of its exports goes to Germany. The upturn

in the Czech Republic will therefore proceed in line

with the upturn in Germany.

In comparison with the rest of the region, the

Czech banking sector is relatively healthy.

Over the next twelve months, we expect a

practically unchanged CZK against EUR and DKK.

CZK has already recovered considerably after the

strong weakening in 2008/09.

The Czech central bank (CNB) took the market by

surprise with an interest-rate reduction at its

meeting in early May. Together with the current

focus on the debt problems in the euro zone this

may delay the time for interest-rate hikes and

prevent a further strengthening of CZK.


The CNB begins lifting its interest rates from the

record-low 0.75% (the prospects are relatively

long).

Focus on the debt problems in the euro zone fades.

The global upswing including the improvement inGerman and Czech economic growth continues.

Concern about the debt problems in the euro zone

escalates. The Czech Republic does not show the

same vulnerability with respect to public

indebtedness as for instance Greece but the theme

still tends to have an adverse effect on CZK.The CNB lowers its interest rates even further.

The global economic upswing is long in coming.

Czech koruna - CZK

16/29


17/29




Per capita GDP (USD, 2008) 13858

GDP growth (Q4 2009 (q/q)) 13.13%


Unemployment (May 2010) 12.00%




Poland has successfully liberalised the economy since 1990. First in line to adopt the euro. Largest export

countries: Germany (24.4%), France (6%), Italy (5.9%). Large industries: machinery, iron, steel, coal, chemicals,

ships. GDP per sector: Service (67.3%), Manufacturing industry (28.1%), Agriculture (4.6%).

EUR/PLN incl. forecast and forward rates Current account (C/A)

Current Account

Current Account % GDPSource: Reuters EcoWin

01 02 03 04 05 06 07 08 09

%GDP

-5,5

-5,0

-4,5

-4,0

-3,5

-3,0

-2,5

-2,0

-1,5

-1,0

Billion

PLN

-17,5

-15,0

-12,5

-10,0

-7,5

-5,0

-2,5


As the only country in the region, Poland camethrough the global slowdown in growth without

negative growth rates. Notably domestic demand

supported growth. Poland is in a strong

fundamental position for the period ahead.

Foreign-currency loans make up a lower proportionthan in e.g. Hungary - they constitute a lower risk

for the economy.

Polands weak point is the budget deficit whichwas 7.5% of GDP in 2009.

The zloty is still undervalued; we expect the zlotyto appreciate against the euro over the next 12

months.

The Polish central bank will begin to hike interestrates before the ECB. This will most likely not

happen until early 2011.

The degree of focus on the debt problems in partsof the eurozone may determine the timing and the

speed of a zloty appreciation.


The governments privatisation plans for 2010should support the zloty.

Focus on debt problems in the euro zone fades. The Polish central bank begins to hike rates. There is likelihood of positive surprises from this

years budget deficit. If so, it would be positive for

the zloty.

Zloty is one of the regions most liquid currenciesand is used to take a negative view on the region.

If the pressure on the euro continues, there is riskthat the zloty may appreciate against the euro.

Higher-than-expected budget deficit. In April, the Polish central bank intervened for the

first time in ten years against the zloty. Furtherintervention is a risk but the new Central-Bank

Governor Belka appears less willing to use the

intervention tool.

Polish zloty PLN

17/29


18/29





GDP growth (Q1 2010 (q/q)) 0.88%


Unemployment (March 2010) 11.80%




Hungary is dependent on exports to the EU. Challenges due to high private indebtedness in foreign currencies.

Largest export countries: Germany (25.4%), Italy (5.2%), Romania (5.1%). Large industries: mining, machinery,

textiles, chemicals. GDP per sector: Service (62.4%), Manufacturing industry (34.3%), Agriculture (3.4%).

EUR/HUF incl. forecast and forward rates Current account (C/A)

Current Account


01 02 03 04 05 06 07 08 09

%GDP

-9

-8

-7

-6

-5

-4

-3

-2

-1

0

1

BillionHUF

-500

-450

-400

-350

-300

-250

-200

-150

-100

-50

0

50


A growth upswing is very dependent on rising

export demand (exports account for approx. 80% of

GDP).The Hungarian authorities are therefore not

interested in a much stronger forint. At the other

end is the large share of foreign-currency loans.

At the parliamentary election in April, Fideszreceived 2/3 of the votes. This gives the new

government the possibility to implement reforms

which are necessary to increase the countrys

potential growth rate.

After comments from the new government in early

June, the forint weakened. We see the concern as

exaggerated and expect EUR/HUF to return to the

265/280 range that the rate has been trading in

since mid-2009.

The fundamental case should prevent appreciationof the forint.

The central bank should be prepared to

hike/intervene extraordinarily if EUR/HUF moves

to 300.


The political development is currently decisive for

the forint. The new governments future

cooperation with the IMF may be decisive (the

current loan programme expires in October 2010).

The next review of the programme is in July.

The forint is vulnerable to the current negative

focus on the debt problems in the eurozone since

Hungary shows similar vulnerabilities. The

important difference is that Hungary initiated the

consolidation of the public finances in late 2008

and has a better starting point than e.g. Greece.

Weakening of the forint since a large proportion ofthe total loans in Hungary is in the Swiss franc or

the euro.

Increasin risk aversion.

Hungarian forint HUF

18/29


19/29





GDP growth (Q4 2009 (q/q)) 2.0%


Unemployment 14.40%




The Turkish economy is a mix between modern industry and trade and a traditional agricultural sector. The

largest trading partners are (% of exports): Germany (9.8%), UK (6.2%) and China (7.8%). Large industries: textile,

auto and electronics. GDP per sector: Service (45.8%), Manufacturing industry (24.7%), Agriculture (29.5%).

EUR/TRY incl. forecast and forward rates Current account (C/A) 4 months average

Current Account


90 92 94 96 98 00 02 04 06 08

%GDP

-7

-6

-5

-4

-3

-2

-1

0

1

2

3

4

Billion

USD

-12,5

-10,0

-7,5

-5,0

-2,5

0,0

2,5


The upswing has now gained a firm foothold in

Turkey, and Turkey will report positive growth

again this year. This is supported by recent activity

indicators in Turkey.

A relatively healthy banking sector will support the

upswing.The government is working on initiatives to secure

fiscal discipline in Turkey. This is positive and will

reduce the risk involved in Turkish assets over the

lon term.

Seen in relation to before the sale of risky assets in

2008, the lira is still weaker against the euro and

the US dollar still catch-up potential.

The lira is a dollar-related currency, i.e. our

expectations of a fall in EUR/USD will support the

lira against the euro.

The timing of a lira strengthening will depend on

when the CBRT begins to signal hikes.


The CBRT begins raising its interest rates from the

record-low 6.50%. This happens before the ECB and

the Fed begin raising their interest rates, i.e. the

relative risk premium on the lira increases.

Weaker euro/stronger US dollar.

The global upswing continues also in Turkey.

General risk appetite.

The largest risk for the lira against the euro is

currently a sharp appreciation of the euro against

the dollar.

The global economic upswing is long in coming.

Too aggressive and too early withdrawal of

monetary easing from the ECB and the Fed.

Debt problems in the euro zone escalate with aresultant general re-assessment of country risk.

The CBRT maintains interest rates at the current

6.50% rather than be innin to hike interest rates.

Turkish lira TRY

19/29


20/29


By Kent Bk Iversen


GDP growth (Q4 2009 (q/q)) 2.1%


Unemployment 5.4%




Mexico is also called the 51st state of the US since the country is so dependent on exports to the US. Largest

export countries: The US 80.5%, Canada 3.8% and Germany 1.4%. Large industries: food, beverages, tobacco, oil

and chemicals. GDP per sector: Service (65%), Manufacturing industry (31%), Agriculture (4%).

EUR/MXN incl. forecast and forward rates Current account (C/A)

Current Account


03 04 05 06 07 08 09

%GDP

-0,300

-0,275

-0,250

-0,225

-0,200

-0,175

-0,150

-0,125

-0,100

-0,075

BillionMXN

-50

-45

-40

-35

-30

-25

-20

-15

-10

-5


We expect growth of 4% in 2010 and 2011 after

the worst recession in 2009 in living memory.

Much depends on developments in the US which

account for about 80% of Mexicos exports.

Given expected solid US growth in 2010 (3.2%) and

2011 (2.9%), exports will still be supported.Budding signs that domestic economy will also be

growth engine. Unemployment has fallen from

6.5% to 5.4%.

We expect the peso to strengthen against both

USD and EUR. Still catch-up potential to the levels

before Lehman collapse in the autumn of 2008.

MXN will appreciate the most against EUR in a

scenario with a concurrent fall in EUR/USD.

We see the highest potential at 3-6 months termdue to our expectation of EUR/USD in 117.

At 12 months term, the potential is more limited

due to our expectation of EUR/USD in 127.


MXN has high correlation with USD so continued

USD appreciation will support MXN against EUR.

US growth and employment data.

Mexican growth and inflation data.

If the recovery gains momentum, the country may

be upgraded. S&P downgraded Mexico last year.

Mexico still has an investment-grade rating with astable outlook at the three major credit rating

agencies.

USD weakening is a risk factor.

In a scenario with sharply rising risk aversion and

flight to quality (like after the Lehman collapse

in 2008), the peso will depreciate against both the

dollar and the euro.

Intervention purchase of USD against MXN.

Political deadlock in Mexico. The Liberals hold thepresidency and the Social Democrats are biggest

in the parliament so reforms are difficult.

Mexican peso MXN

20/29


21/29


By Kent Bk Iversen


GDP growth (Q1 2010 (q/q)) 2.7%


Unemployment 7.3%




South Americas largest economy and a powerful BRIK country. Has since 2002 improved its economy in key

areas. Largest export countries: The US (13.7%), Argentina (8.7%) and China (8.1%). Large industries: textiles,

auto, chemicals and wood. GDP per sector: Service (67.7%), Manufacturing industry (25.8%), Agriculture (6.5 %).

EUR/BRL incl. forecast and forward rates Current account (C/A)

Current Account [ma 3]

12 mth. Current Account % GDP

04 05 06 07 08 09

%GDP

-2,0

-1,5

-1,0

-0,5

0,0

0,5

1,0

1,5

2,0

Billion

USD

-5

-4

-3

-2

-1

0

1

2

3


Brazil has escaped from the crisis; the GDP level

prior to the crisis was reached already in Q4 2009.

Brazil has Latin Americas highest growth rate.

We have just revised up our growth estimate for

2010 to 7.5% and 4.7% for 2011.

Inflation is moving up and the latest statementshowed 5.22% y/y, which is still within the target

of 2.5% 6.5%.

The country is gaining influence (BRIK country)

and is in focus on the global political scene.

The real is supported by an attractive interest-rate

level. Interest rates have been raised twice by 75

bp in 2010 to now 10.25%.

More hikes in store which will support the real.

A less dollar-related investment in Latin America

than MXN and COP.

Against the US dollar, the real is weaker than

before the Lehman collapse in 2008, so still catch

up. Against the euro, the real is weaker so limited

potential.


Brazil has a BBB- rating (lowest investment grade).

Is in a strong position for an upgrade.

Presidential election in October. Lulas line is

expected to be continued, which is positive for BRL.

Fiscal tightening after the presidential election

will be welcomed by the financial markets.

Continued strong domestic growth and fairexports to the US and China make the country

immune to the eurozone crisis.

Intervention purchase of USD against BRL.

Higher taxes on capital flows. In late 2009, the

government introduced a 2% tax on capital flows.

Presidential election in October. Has not yet given

rise to movements in the market, but keep an eye

on statements on a more relaxed fiscal policy and

whether some candidates question the centralbanks independence.

Negative news on public indebtedness.

Brazilian real BRL

21/29


22/29


By Kent Bk Iversen


GDP growth (Q1 2010 (q/q)) 1.1%


Unemployment 25.2%




Many natural resources and healthy banking sector but after-effects of apartheid e.g. high unemployment.

Largest export countries: Japan (11.1%), The US (11.1%) and Germany (6.8%). Large industries: mining,

machinery and textiles. GDP per sector: Service (64.4%), Manufacturing industry (32.1%), Agriculture (3.5%).

EUR/ZAR incl. forecast and forward rates Current account (C/A)


96 98 00 02 04 06 08

%GDP

-8

-7

-6

-5

-4

-3

-2

-1

0

1

Billion

ZAR

-45

-40

-35

-30

-25

-20

-15

-10

-5

0

5


The FIFA World Cup supports GDP directly in Q2-3.

Then the contribution will be more uncertain, but

we see more gains than risks.

Inflation under control and within target.

The current account is improving markedly.

Too many South Africans live on public aid.

Constitutes risk to public finances but is also

potential if they are educated and employed.

Buy the rand against the euro, e.g. via 10-year

bonds where we expect a yield decline from the

current level of 8.75% to 8.25% at 6 months term.

High real interest rate (almost 4%) supports the

rand.

Debt crisis in the eurozone does not spoil theglobal growth picture, which is very positive. Asia

is on the rise, which will support the rand due to

the large export of commodities to Asia.

We see EUR/ZAR in 9.00 at 12 months term.


South Africa is currently on negative outlook at

S&P and Fitch. Change of negative outlook will be

positive.

Price rises of commodities (our main scenario).

Development in the US equity market. ZAR has a

high correlation with Dow Jones. Equity price

increases are thus positive for ZAR.EUR/ZAR has moved down since early 2009. We

expect the trend to continue and a test of 9.00 in

EUR/ZAR within 12 months.

South Africa is currently on negative outlook at

S&P and Fitch. A downgrade will be negative.

Intervention from the central bank if ZAR

continues to appreciate.

Falling US equity markets and price declines on

commodities.

Escalation of the problems in the Spanish bankingsector may at worst spread to South Africas very

healthy banking sector and cause ZAR to weaken.

South African rand ZAR

22/29


23/29





-5

0

5

10

15

jan-200 4 okt-2006 jul -20 09 apr -20 12

Change(y/y)

GDP y/y CPI y/y

GDP growth (Q1 2010 (q/q)) 0.49%


Unemployment (March 2010) 4.20%




China has moved from planned economy to a rapidly growing market economy and is now a key player in the

global economy. Largest export countries: The US (17.7%), Hong Kong (13.3%), Japan (8.1%). Large industries:

mining, consumer discretionaries, machinery. GDP per sector: Manufacturing industry (48.6%), Service (40.5%),

USD/CNY incl. forecast and forward rates Current account (C/A)

Current Account

Current Account % GDP

04 05 06 07 08 09

%GDP

3

4

5

6

7

8

9

10

11

Billion

USD

50

100

150

200

250

300

350

400

450


Until mid-2008, the exchange-rate policy in China

aimed at letting CNY strengthen gradually against

USD. But the global slowdown in growth hit China

too and the Chinese Central Bank (PBoC) changed

its policy. Since mid-2008, CNY has been fairly

stable against USD at 6.83.

The PBoC has already begun to tighten banks

reserve requirements and on 19 June the PBoC

announced increased flexibility of the yuan.

In principle, the PBoCs statement of increased

flexibility of the yuan does not vow anything about

future appreciation of the currency.

We expect it will lead to appreciation of the yuan

against the US dollar.

It will not be a revaluation of the yuan but agradual appreciation of the yuan against the US

dollar by 5%-6% a year.


Continued strong growth indicators from China

although growth is expected to fall slightly.

Particularly the development of Chinas exports is

important to yuan appreciation.

Global growth continues to show signs of

improvement.

A longer period with a weakening of the US dollarmay lead to a sharper appreciation than the 5%-6%

against the US dollar a year.

Disappointing Chinese exports will put a damper

on a yuan appreciation.

So will a period of sharp appreciation of the US

dollar. It is not unlikely that such a scenario may

lead to a rise in USD/CNY.

Increasing risk aversion.

Chinese yuan CNY

23/29


24/29


Majors & Scandies

Against

EUR Consensus USD Consensus DKK Consensus GBP* Consensus

EUR

Spot - - 1.23 - 7.44 - 1.21 -

3M - - 1.20 1.20 7.45 7.45 1.20 1.20

6M - - 1.17 1.20 7.45 7.45 1.22 1.22

12M - - 1.27 1.18 7.45 7.45 1.25 1.23

USD

Spot 1.23 - - - 6.06 - 1.49 -

3M 1.20 1.20 - - 6.21 6.21 1.45 1.45

6M 1.17 1.20 - - 6.37 6.21 1.43 1.46

12M 1.27 1.18 - - 5.87 6.31 1.59 1.46

GBP

Spot 0.83 - 1.49 - 9.01 - - -3M 0.83 0.83 1.45 1.45 8.98 8.98 - -

6M 0.82 0.82 1.43 1.46 9.09 9.09 - -

12M 0.80 0.81 1.59 1.46 9.31 9.20 - -

JPY

Spot 111 - 90 - 6.70 - 134 -

3M 110 113 92 94 6.77 6.59 133 136

6M 115 113 98 94 6.48 6.59 140 138

12M 120 116 94 98 6.21 6.42 150 143

CHF

Spot 1.36 - 1.11 - 5.47 - 1.65 -

3M - 1.38 - 1.15 - 5.40 - 1.66

6M - 1.37 - 1.14 - 5.44 - 1.67

12M - 1.38 - 1.17 - 5.40 - 1.70

NOK

Spot 7.94 - 6.46 - 0.94 - 9.62 -3M 8.00 7.81 6.67 6.51 0.93 0.95 9.64 9.41

6M 7.95 7.70 6.79 6.42 0.94 0.97 9.70 9.39

12M 7.90 7.65 6.22 6.48 0.94 0.97 9.88 9.44

SEK

Spot 9.53 - 7.76 - 0.78 - 11.53 -

3M 9.50 9.48 7.92 7.90 0.78 0.79 11.45 11.42

6M 9.40 9.40 8.03 7.83 0.79 0.79 11.46 11.46

12M 9.35 9.35 7.36 7.92 0.80 0.80 11.69 11.54

DKK

Spot 7.44 - 6.06 - - - 9.01 -

3M 7.45 7.45 6.21 6.21 - - 8.98 8.98

6M 7.45 7.45 6.37 6.21 - - 9.09 9.09

12M 7.45 7.45 5.87 6.31 - - 9.31 9.20

Note: All the exchange rates are quoted in accordance with inter-bank conventions except for the column marked(*) which has GBP as the base currency. The consensus estimates are from a Bloomberg questionnaire on FX

estimates. Please note: The consensus estimates may deviate from estimates based on cross rate calculations.


FX forecasts including consensus

24/29


25/29


Emerging Markets

Against

EUR Consensus USD Consensus DKK Consensus GBP* Consensus

CZK

Spot 25.69 - 20.86 - 0.29 - 31.17 -

3M 25.60 25.45 21.33 21.21 0.29 0.29 30.84 30.66

6M 25.50 25.40 21.79 21.17 0.29 0.29 31.10 30.60

12M 25.50 25.20 20.08 21.36 0.29 0.30 31.88 30.73

PLN

Spot 4.07 - 3.31 - 1.83 - 4.94 -

3M 3.95 3.90 3.29 3.25 1.89 1.91 4.76 4.70

6M 3.90 3.80 3.33 3.17 1.91 1.96 4.76 4.58

12M 3.80 3.78 2.99 3.20 1.96 1.97 4.75 4.61

HUF

Spot 280.56 - 227.9 - 0.27 - 340.49 -3M 280 270 233 225 0.27 0.28 337.35 325

6M 270 266 231 222 0.28 0.28 329.27 320

12M 270 269 213 228 0.28 0.28 337.50 328

TRY

Spot 1.94 - 1.57 - 3.84 - 2.35 -

3M 1.86 1.87 1.55 1.56 4.01 3.98 2.24 2.26

6M 1.76 1.85 1.50 1.54 4.25 4.03 2.14 2.23

12M 1.84 1.84 1.45 1.56 4.05 4.05 2.30 2.24

MXN

Spot 15.59 - 12.66 - 0.48 - 18.92 -

3M 15.30 14.736 12.75 12.28 0.49 0.51 18.43 17.75

6M 14.63 14.568 12.50 12.14 0.51 0.51 17.84 17.55

12M 14.92 14.396 11.75 12.20 0.50 0.52 18.65 17.56

BRL

Spot 2.20 - 1.79 - 3.38 - 2.67 -3M 2.20 2.2 1.83 1.80 3.39 3.45 2.65 2.60

6M 2.11 2.1 1.80 1.79 3.54 3.47 2.57 2.59

12M 2.16 2.1 1.70 1.77 3.45 3.57 2.70 2.55

ZAR

Spot 9.29 - 7.55 - 0.80 - 11.28 -

3M 9.20 9.3 7.67 7.77 0.81 0.80 11.09 11.23

6M 9.10 9.4 7.78 7.80 0.82 0.80 11.10 11.28

12M 9.00 9.3 7.09 7.90 0.83 0.80 11.26 11.37

CNY

Spot 8.39 - 6.81 - 0.89 - 10.18 -

3M 8.04 8.1 6.70 6.75 0.93 0.92 9.69 9.76

6M 7.72 8.0 6.60 6.66 0.96 0.93 9.42 9.63

12M 8.19 7.8 6.45 6.60 0.91 0.96 10.24 9.50

Note: All the exchange rates are quoted in accordance with inter-bank conventions except for the column marked(*) which has GBP as the base currency. The consensus estimates are from a Bloomberg questionnaire on FX

estimates. Please note: The consensus estimates may deviate from estimates based on cross rate calculations.


FX forecasts including consensus

25/29


26/29


Yield outlook government bonds

Central-bank

rate1-year 2-year 5-year* 10-year 30-year

The US

Current 0.25% 0.27% 0.70% 1.95% 3.15% 4.09%

High 0.25% 1.40% 2.10% 3.40% 4.25% 5.25%

Low 0.00% 0.30% 0.75% 2.10% 3.25% 4.00%

The euro zone

Current 1.00% 0.50% 0.57% 1.55% 2.66% 3.37%

High 1.00% 1.40% 1.75% 2.65% 3.75% 4.70%

Low 1.00% 0.40% 0.45% 1.40% 2.50% 3.25%

Denmark

Current 1.05% 0.50% 0.63% 1.20% 2.74% 3.37%

High 1.15% 1.65% 1.95% 2.50% 3.90% 4.70%

Low 1.05% 0.40% 0.50% 1.15% 2.65% 3.25%Note: 4-year yields, Denmark


Commodities forecast average prices

Price 1st

contractQ2 2010 Q3 2010 Q4 2010 Q1 2011

Ave.

2010

Ave.

2011

WTI Crude oil (USD/bl) 78 75 80 85 88 78 90

Brent Crude oil (USD/bl) 78 74 79 84 87 77 89

LME Aluminium (USD/tonne) 1959 2100 2000 2000 2000 - -

LME Copper (USD/tonne) 6610 7500 7700 7700 7900 - -


Economic forecasts

26/29


27/29


Chart 1: EUR/USD

Chart 3: EUR/CHF

Chart 5: EUR/NOK

Chart 7: EUR/CZK

Chart 2: EUR/GBP

Chart 4: EUR/JPY

Chart 6: EUR/SEK

Chart 8: EUR/PLN

1,10

1,20

1,30

1,40

1,50

1,60

1,70

jun 05 jun 06 jun 07 jun 08 jun 09

EUR/USD

1,30

1,35

1,40

1,45

1,50

1,55

1,60

1,65

1,70


EUR/CHF

7,00

7,50

8,00

8,50

9,00

9,50

10,00

10,50


EUR/NOK

22

23

24

25

26

27

28

29

30

31

32

33


EUR/CZK

0,60

0,65

0,70

0,75

0,80

0,85

0,90

0,95

1,00


EUR/GBP

100

110

120

130

140

150

160

170

180


EUR/JPY

8,50

9,00

9,50

10,00

10,50

11,00

11,50

12,00


EUR/SEK

3

3,5

4

4,5

5

5,5


EUR/PLN

5-year historical FX rates

Source: Reuters EcoWin




Note:Past performance is not a reliable indicator of future performance





27/29


28/29


Chart 9: EUR/HUF

Chart 11: EUR/MXN

Chart 13: EUR/ZAR

Chart 10: EUR/TRY

Chart 12: EUR/BRL

Chart 14: EUR/CNY

220

240

260

280

300

320

340


EUR/HUF

10

12

14

16

18

20


EUR/MXN

6

7

8

9

10

11

12

13

14

15

16


EUR/ZAR

1,50

1,60

1,70

1,80

1,90

2,00

2,10

2,20

2,30

2,40


EUR/TRY

2

2,2

2,4

2,6

2,8

3

3,2

3,4

3,6


EUR/BRL

8

8,5

9

9,5

10

10,5

11

11,5


EUR/CNY







5-year historical FX rates

Note:Past performance is not a reliable indicator of future performance

28/29


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Disclaimer & Disclosure

Jyske Bank is supervised by the Danish Financial Supervisory Authority.

The research report is based on information which Jyske Bank finds reliable, but Jyske Bank does not assume anyresponsibility for the correctness of the material nor any liability for transactions made on the basis of the information

or the estimates of the report. The estimates and recommendations of the research report may be changed without

notice. The report is for the personal use of Jyske Bank's customers and may not be copied.

This is a recommendation and not an investment report.

Conflicts of interest

Jyske Bank has prepared procedures to prevent conflicts of interest. These procedures have been incorporated in the

business procedures covering the research activities of Jyske Markets, a business unit of Jyske Bank.

Jyske Bank's FX, money market and commodity analysts may not hold positions in the instruments for which they

prepare research reports, but Jyske Bank is permitted to hold positions and/or have interests in the instruments for

which such reports are prepared. The analysts receive no payment from persons interested in individual research

reports.

Read more about Jyske Bank's policy on conflicts of interest at www.jyskebank.dk/terms

Risk

FX, money market and/or commodity investment involves risk. Movements in the credit market, the sector and/or the

news flow, etc. regarding the issuer may affect the exchange rate/the interest rate/the price of the commodity. See the

front page of the research report for our view of the risk associated with the currency/interest rate/commodity

investment. The risk factors and/or the sensitivity calculations stated in the report should not be regarded as

exhaustive.

Update of the research report

Analyses, recommendations, and ad hoc publications are not updated. A new publication will instead be published if

and when it is found necessary. Market comments are updated daily.

See the front page for the initial date of publication of the report.

All prices stated are the latest trading prices at the time of the release of the research report, unless otherwise stated.

jyske bank jun 24 fx spot on

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