Foreign Exchange

London 08:00

FX Daily Strategist: Europe

Fed balance sheet vs. SPX

3.00 FFR cut 2.75 to 00.25% 2.50 Dec 08 2.25 2.00 1.75 1.50 1.25 1.00 0.75 0.50 08 Bernanke Jackson Hole Speech Aug 10 QE1 begins Mar 09 09 10 11 QE2 begins Nov 10 QE1 ends Q1 2010 1500 1400 1300 1200 SPX 1100 1000

PM Papandreou and Cabinet win confidence vote; EURUSD to rebound to 1.4500 FOMC to firm up its dovish tone Norges Bank rhetoric will be important since they were more dovish than expected at the last meeting

900 800 700 600

Source: Bloomberg, BNPP. Expectations that the Fed should firm its dovish tone will likely provide a boost to risky assets. Equity markets should find greater upside support, boosting high beta, commodity currencies.
GMT Country EU 08:30 GB 09:00 EU (Apr) 09:00 ZA (May) 09:00 ZA (May) 09:00 PL (May) 09:00 PL (May) 09:00 PL (May) 09:00 MY (May) 09:00 EU (Apr) 09:15 DE 12:00 BR (May) 12:00 NO (Jun) 13:00 MX (Apr) 13:00 PL (May) 13:00 PL (May) 14:30 US 15:30 BR (Jun) 15:30 BR (Jun) 15:30 BR (Jun) 18:15 US VN (Jun) BR PL VN (Jun) Release Mkt Last ECB General Council Meeting (no rate announcement) BoE MPC Minutes Industrial Orde % 1.4 -1.8 (m/m) CPI (all items) % (m/m) CPI (all items) % (y/y) Unemployment 12.10 Ra % Retail Sales % -1.30 (m/m) Retail Sales % 12.70 (y/y) CPI % (y/y) 3.2 Industrial Orde % 14.0 14.1 (y/y) Germany to sell additional EUR 4 bln of 10-year Bunds Unemployment Ra % Norges Bank Rate 2.25 2.25 Announcement % Retail Sales % (y/y) Net Core CPI % 0.20 (m/m) Net Core CPI % 2.20 (y/y) EIA Oil Invento USD 3400000 FX Flow Rept Pr bn USD FX Flow FO Prev bn USD Fx FLow TO Prev bn USD FOMC Rate 0.125 0.125 Announcement % Exports YTD % (y/y) 32.8 Public Holiday Public Holiday Imports YTD % (y/y) 29.7

The Greek Parliaments vote of confidence went along party lines and saw the reshuffled cabinet supported by a count of 155 to 143 (two opposition MPs abstained). Focus now turns to the passage of the budget on June 28. The government's majority in the confidence vote, while short of providing the added certainty that a larger 160+ majority might have brought, suggests nonetheless that PM Papandreou retains control of his party and therefore that Parliament will pass the budget. As we noted yesterday, it would seem perverse for MPs to vote in favour of the new cabinet last night only to vote down the most important piece of legislation associated with that same cabinet a week later. However, the deal is not yet done and dusted: one major risk to the budget may be the size of street protests between now and the vote, with potential for popular pressure to get to some of the less committed MPs. There is speculation that a general strike will be called to coincide with the vote. The passage of the new austerity budget would mean almost certain approval of the next tranche of aid at a special EcoFin on July 3; while the EU has asked for national unity, we cannot see Europe withholding the funds on the basis of an unconvincing majority in favour of austerity. Negotiations over the second bailout package will continue but with Germany having conceded major ground last week, the obstacles now appear much less daunting. While there is no guarantee of smooth sailing from here, the dark cloud over the euro may be passing. In the short-term, we favour a rebound in EURUSD to 1.4500 and EURCHF to 1.2167, a break here opens the way to further gains towards 1.2300. Passage of the budget next week should see further gains for EUR and risk currencies. The rebound in risk should find further legs from the FOMC, which will conclude its two-day meeting later today. Persistent data weakness out of the US will likely prompt the FOMC to enhance its already dovish tone: we expect the FOMC to firm up its language on keeping rates low for an "extended period" and apply this language to the balance sheet as well. In addition, we see the FOMC announcing that they will reinvest in longer term maturities in Treasuries. While we expect no rate hikes from the Norges Bank today, the rhetoric will be closely watched especially since the bank was more dovish than expected at the last meeting. Currently, it looks like the Norges Bank intends to deliver the next rate hike in October, but we think it could come in September given strong fundamentals. Thus, the statement could come on the hawkish side with an upward revision to the rate profile while acknowledging peripheral concerns as risks. A bullish statement may help EURNOK push lower, breaking out of recent ranges. Lastly, given MPC members' recent dovish statements, we would expect the BoE statement to come in on the dovish side. Both King and Fisher reiterated their view that rates should remain at current levels. Our view is that the BoE is unlikely to hike in 2011, or even 2012, despite rising inflation. Economic data continue to highlight the weakness in the economy, and wage growth remains subdued, leaving the argument favoring rate hikes less convincing. We see further GBP weakness ahead especially against EUR and AUD.
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Fed Balance Sheet (m illions)

This is not classified as objective research. Please refer to important information at the end of the report.
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Market: EURUSD makes a higher high, higher low for 3rd straight session, in a 1.4346-1.4434 this morning. USD shows mixed performance vs. G10 the past 24 hours, down 0.16% vs. NZD, flat against SEK, GBP, NOK, EUR, JPY and AUD but gaining 0.13% vs. CHF. Asian shares trading about 0.60% in the green on average, with Japan outperforming +1.60%. This follows a 1.34% sharp rally in US stocks overnight. Data/ events for day ahead (Via MNI) European data for Wednesday starts at 0645GMT with the release of manufacturing/services sentiment data from France. EMU data continues with industrial orders for April, at 0900GMT. Norges Bank announces the monetary policy decision at 1200GMT, where no change is expected. A press conference starts later on, at 1245GMT. In the UK, the minutes of the latest Bank of England MPC meeting are due at 0830GMT. Markets expect eight members of the MPC to continue to vote the same way as in recent months. It is new member Ben Broadbent's first meeting - he is taking over from uber hawk Andrew Sentance - and is expected to join the unchanged camp based on his most recent comments. This means that there should be two votes for an immediate 25bp hike in Bank Rate (Martin Weale and BOE Chief Economist Spencer Dale) and 7 for unchanged rates. Adam Posen is expected to continue his support for stg50bn more QE. US data starts at 1100GMT with the weekly MBA Mortgage Application Index, which is followed at 1145GMT by the weekly ICSC-Goldman Store Sales data. US data continues at 1255GMT with the weekly Redbook Average, while at 1400GMT with the FHFA Home Price Index and May BLS Mass Layoffs data are due, followed at 1430GMT by the weekly EIA Crude Oil Stocks data. Late US data includes the Treasury Allotments By Class, at 1900GMT. The FOMC decision is due late on Wednesday. NEWS Europe: Greek government wins vote of confidence, 155-143. Greek relief but more hurdles to clear. Next timelines to watch: June 22: EU, ECB & IMF talks; June 23-24: EU Summit in Brussels; June 28: Greek parliamentary vote on austerity package. The passage of the new austerity budget will mean the approval of the next tranche of aid at a special EcoFin on July 3. Foreign Exchange Strategy Wednesday, 22 June 2011 http://www.GlobalMarkets.bnpparibas.com

Greek Finance Minister Evangelos Venizelos overnight said that the governments budget-cutting plan would be voted on this month, ahead of a key meeting of Eurozone Finance Ministers on July 3, in order to secure the next tranche of Greeces loan from international creditors. Fitch says that a rollover of Greek debt doesn't mean a default of Greek debt. A Vienna initiative type rollover would amount to sovereign default event. (MNI) IMF's Lipsky says underlying Greek fiscal system is broken but can be fixed is a matter of political will. He also said that the Greek programme has reasonable chance of success if fully implemented. He also said that the IMF and partners are ready to aid Eurozone periphery countries that are willing to make an effort. He mentions that the Eurozone periphery economies direct impact is very small, but that there is concern on the spillovers from periphery to core countries. (Reuters) The exposure of German banks to Greece adds up to 20 billion euros at most; the head of the German banking association told a radio station on Tuesday, underlining the banks' willingness to support another bailout. (Reuters) PIMCO head predicts Greece, others will default: The head of PIMCO, the world's biggest bond fund, predicted that Greece and other European economies would default on their debts to resolve their problems as the euro area faces a debt crisis. "For the next three years, we're going to see different economies work out different problems. For European economies, especially Greece, it would be through default," Mohamed El-Erian, chief executive of PIMCO, told reporters in Taipei on Wednesday via a video conference. He added on Wednesday it was "unlikely but not impossible" that a Greek default would trigger another global financial crisis. (Reuters)

The repair of Spains crisis-stricken economy is incomplete and the risks of further setbacks are considerable, the International Monetary Fund said on Tuesday, amid continued nervousness in the eurozone over possible contagion from the Greek crisis. In a statement following one of its regular assessments of Spain, the IMF acknowledged that Spain had responded vigorously to its economic problems over the past year but criticised the dysfunctional labour market and called for further reforms. (FT) Spain paid a slightly higher premium to borrow 2.99 billion euros ($4.29 billion) over three and six months at a debt sale on Tuesday as investors awaited clarity

over a second Greek bailout. The amount of treasury bills sold was at the higher end of the Spanish government's target range of 2.25 billion to 3.25 billion euros and attracted solid volumes of bids from investors. Yields on the three-month paper jumped 18 basis points compared to the last tender in May and on six-month paper they inched up a point. Paul Fisher, the Bank of Englands Executive Director for Markets and a member of the central banks Monetary Policy committee, said further quantitative easing remains very much on the table, if the British economy weakens substantially. ( UK's Osborne says the economy is now growing, creating jobs. He also said that the deficit reduction plan allows for low interest rates and that the public finance data show deficit cutting on track. (MNI) UK's PM Cameron says that the UK shouldn't be involved in Greek bailouts and that the UK suffers when the Eurozone struggles. He adds that the UK banks have done a lot to boost capital. (MNI) China BofA may sell China Construction Bank stake later this year in an effort to comply with new industry capital rules but would remain a strategic investor in the bank, Bloomberg reported, citing sources briefed on the plans. The largest U.S. bank by assets currently holds a $21 billion stake in China Construction, totaling 25.6 billion shares. The sale would be driven by tougher capital rules for the largest banks globally, and an expected capital surcharge in the U.S. for so-called systemically important banks, Bloomberg reported. A share lock-up agreement between China Construction and BofA expires in August, which would allow BofA to sell part of its stake. (Reuters) Authorized organizations from the Chinese mainland and Taiwan exchanged written documents Tuesday to confirm the schedule of a pilot travel program that will allow mainlanders to visit Taiwan as individual tourists. The mainland-based Association for Relations Across the Taiwan Strait (ARATS) and its Taiwan counterpart, the Straits Exchange Foundation (SEF) also exchanged documents confirming other previous agreements, including additional cross-Strait direct flights. (ChinaDaily) Chinas Data Leaks Fall Under Scrutiny: A Chinese government probe into leaks of economic data has underlined concerns about the often chaotic way that statistics on the world's second-largest economy are released, which could benefit insiders but leaves traders confused and exposed. In international markets, US economic data are still the biggest market mover, but Foreign Exchange Strategy Wednesday, 22 June 2011 http://www.GlobalMarkets.bnpparibas.com

China is now running a close second as the world's most important driver of growth and biggest consumer of commodities. Monthly data on China's industrial output, consumer prices, and real-estate investment are eagerly awaited in trading rooms, not just in Shanghai but also in markets including Hong Kong, Tokyo, and Singapore. With the global economy increasingly intertwined, major news on the Chinese economy often moves U.S. and European markets. (WSJ) China June inflation likely to exceed May level NDRC June will be higher than May's 34-month high of 5.5 percent before moderating in the second half, the National Development and Reform Commission (NDRC) said on Wednesday. The top economic planner said government tightening measures to control inflation were gradually taking effect and consumer prices would remain under control this year. (Reuters) China allows foreign banks to distribute mutual funds China has revised rules to allow foreign commercial banks to distribute mutual funds in the country, enabling global banks to expand their presence in the $400 billion market. (Reuters) PetroChina's Canada Deal Called Off Encana Corp. and PetroChina Co. ended a US$5.5-billion partnership to develop a large tract of shale natural gas in western Canada, with both sides saying they failed to agree on terms. (WSJ) Mitsubishi to form JV with China state-run food firm Cofco Japanese trading firm Mitsubishi Corp said on Wednesday it will form a joint venture with Chinese staterun food conglomerate Cofco on chicken and pig farming and meat processing in the country, one of the world's biggest consumers of meat. (Reuters) Chinese officials played down the damage to the country's rice production from drought and now flooding in major rice growing central and south areas, state media reported on Wednesday. Meanwhile the government, in an effort to calm food price rises, reaffirmed that the world's largest wheat producer is set to reap a bumper harvest as farmers have completed 90 percent of their harvest, damaged earlier by the drought in the north. (Reuters) Other Asia: Japan, China agree on 2011/12 coal term price, which includes Chinas 10% export tax, at around $145/tonne, up from $115.50 yr ago- around $25/t higher than benchmark Australia coal price. No impact on spot market expected as volume is limited. (Reuters) Japanese Ruling party may add conditions to sales tax hike timing. On Monday, the ruling party's tax and social security panel refused to sign off on government

reforms including a doubling of the 5 percent sales tax by the year starting in April 2015 after lawmakers voiced worries about the impact on the economy. (Reuters) Japan Bank for International Cooperation has signed a memorandum of understanding (MOU) with Brazil's state development bank BNDES on Brazilian realdenominated financing, JBIC said in a statement yesterday. (RLPC) MSCI Keeps Emerging-Market Status For South Korea, Taiwan: Index manager MSCI Inc., after an annual review, said it will continue to classify Taiwan and South Korea as emerging markets despite mounting speculation in recent years that the two countries might be given developed-market status. South Korea and Taiwan have long been seen as potential candidates for an upgrade from emerging- to developed-market status by MSCI, manager of major equity indexes used by investors. Both were reviewed last year as well, and MSCI said Tuesday that they will stay under review for possible reclassification. (WSJ) South Korea's finance minister on Wednesday expressed concern that consumer inflation is not easing as quickly as the government had expected and could remain high for longer than anticipated. Monsoon rains are likely to be below normal this year, the weather department said in its revised forecast on Tuesday. The India Meteorological Department (IMD) said the south-west monsoon rains would be 95% of the long-period average, down from its April forecast of 98% US: US Treasury Secretary Tim Geithner said that it is very important that the European Union speaks with a clear more unified voice regarding its strategy to combat with sovereign debt crisis. Geithner said the US is very actively involved in helping them get to a sensible place. Geithner said he told Group of Seven leaders over the weekend that the European Union has "a very substantial financial arsenal" at its disposal and needs to ensure that it is "available to be deployed to do the kind of things they need to do to make this process work." On the US, he is confident that the U.S. will avoid a default crisis this summer as policy makers near agreement on a broad budget framework." Former Utah Gov. Jon Huntsman Jr. formally launched his campaign for the White House on Tuesday, with a rally in the state that will make or break his improbable quest. Mr. Huntsman, who only weeks ago was President Barack Obama's ambassador to China, barnstormed from Jersey City, N.J., to New Foreign Exchange Strategy Wednesday, 22 June 2011 http://www.GlobalMarkets.bnpparibas.com

Hampshire and back to Manhattan, touching each base he will need to be a contender. (WSJ) US Treasury Aide Miller per Reuters says the debt limit must and will be raised even if there is no fiscal agreement. Congress understands they must raise the debt limit and both parties recognize the need for deficit reduction. Treasury is not seeing any worries about debt levels per market participation, and Treasury still expects solid demand at debt auctions. The unwinding of stimulus and bailout programs will allow the Treasury to borrow less. There is no explicit target on the average maturity of the debt, but Treasury will keep extending it. She was speaking at a Ldn Euromoney confab. (IGM) US existing home sales declines less than expected -3.8% vs. -5.0%. The drop in May was more than the decline in April which only saw a declined of 1.8%.

Others: The International Energy Agency said its seeing signs Saudi oil production is rising. The IEA said its monitoring markets to determine whether members need to release reserves. There are indications that Saudi production is increasing, David Fyfe, head of the IEAs industry and markets division, said i. At the same time, it takes time for that oil to get to the market, and Saudi domestic crude utilization will probably also be increasing in June and July. Saudi Arabia burns petroleum during the hottest part of the year to generate electricity for its own population, boosting domestic consumption in the summer months. The IEA forecast earlier this month that third-quarter oil demand in the kingdom will jump 5.6% from the year-earlier period to 3.19 million barrels a day. Venezuelas Oil Ministry overnight reported that production in the OPEC member rose to 2.82 million barrels a day in April from 2.75 million barrels a year earlier. Stockpiles of crude oil in China fell 3.5% at the end of May from a month earlier, according to China Oil, Gas & Petrochemicals, a newsletter published every two weeks by the official Xinhua News Agency. The US and China are the worlds two largest oil-consuming countries. The World Bank is taking the rare step of encouraging companies in developing countries to buy insurance in the derivatives markets against sudden changes in food prices with a deal that should allow them to hedge $4bn worth of commodities. Countries such as China and India weather a second surge in agricultural commodities prices following the 2007-08 food crisis. (FT)

The UN General Assembly on Tuesday appointed Ban Ki-moon as the UN secretary-general for a second five-year term starting January 1, 2012. The 192-member General Assembly made the appointment after adopting a resolution by acclamation at a plenary session here on the basis of a decision of the UN Security Council to recommend Ban to the top UN post for a second term. The 15-nation Security Council made the recommendation on June 17. (ChinaDaily)

Foreign Exchange Strategy Wednesday, 22 June 2011 http://www.GlobalMarkets.bnpparibas.com

Rumours of Exaggerated

AUD

Demise

Much
Chart 1: AUDUSD versus China PMI
62.5 60.0 57.5 55.0 52.5 50.0 47.5 45.0 42.5 40.0 37.5 07 08 09 10 11 AUDUSD China PMI 1.10 1.05 1.00 0.95 0.90 0.85 0.80 0.75 0.70 0.65 0.60

AUD has been subject to a series of "wobbles" in recent weeks. If it wasn't affected by periods of "risk-off" market sentiment centred on Greek fiscal travails, then it was affected by episodes of oil and other commodity price weakness associated in part with fears that Chinese growth, and hence commodity demand, will slow significantly. We have also witnessed an apparent change of tune by the RBA between its May and June meetings. In May , the RBA signalled that a resumption of monetary policy tightening may not be far off, but in June, it appeared to soften its stance. The Board cited evidence that some parts of the economy were experiencing softer growth (partly a result of past exchange-rate appreciation and prior RBA rate rises) as well as somewhat more elevated concerns about global growth risks, centred on European sovereign debt problems. We suspect markets are too complacent about the risks of the RBA resuming policy tightening in coming months. We are also less concerned than many in the market about a Chinese growth slowdown dragging commodity prices sharply lower and bringing renewed pressure to bear on commodity currencies. In particular, our commodity analysts consider that demand and supply conditions across a range of commodities (copper, aluminium and zinc in particular) will warrant higher, not lower, prices later this year and in 2012. In addition, the limited likelihood of any early resumption of full-scale Libyan oil production will likely keep oil prices at or above current levels for the remainder of 2011. Our China economists meanwhile, acknowledge that growth has slowed in Q2, and partly as the result of past monetary tightening measures (qualitative restrictions on bank lending in particular), they consider it likely that some current lending restraints will be relaxed as early as Q3 to ensure that growth remains close to 9% in 2011 overall and through 2012. The RBAs growth and inflation forecasts foresee the recent fall in growth from the devastating floods and other climatic events as giving way to growth at or above trend during its forecast horizon. It also considers that inflation is likely to rise in underlying terms from here, potentially threatening the top of the 2-3% inflation target range towards the end of the forecast horizon. It is, therefore, implicit in the Boards forecasts that interest rates will need to be higher at some point, yet money markets currently price in virtually zero chance of a rate rise in the coming twelve months. During a Q&A session after a speech on15 June, RBA governor Stevens drew attention to the importance of upcoming (Q2) inflation data due at the end of July as bearing on the RBAs policy thinking. Were this to show a significant rise in the RBA's preferred underlying measures, expectations for an early resumption of tightening could quickly surface. As a result of the June minutes, we have pushed our next tightening call out to October, but this is still a more hawkish view than priced by money markets. On our current working assumption that Greece will buy-in to the outline agreement for a new aid package, which would then be expected to see the euro rally, we are not expecting the recent dip in AUDUSD to extend much Foreign Exchange Strategy Wednesday, 22 June 2011 http://www.GlobalMarkets.bnpparibas.com

Source: Bloomberg, BNP Paribas

Chart 2: AUD TWI versus Terms of Trade

1.7 1.6 1.5 1.4 1.3 1.2 1.1 1.0 0.9 0.8 0.7 97 99 00 01 02 03 04 05 06 07 08 09 10 AUD TWI (rhs) Australia ToT 115 110 105 100 95 90 85 80 75 70 65

Source: Reuters Ecowin Pro, BNP Paribas further. During Q3 and into Q4, we look for AUDUSD to strengthen back towards its previous highs around 1.10 and for this level to be exceeded during Q4. From a trading perspective, we particularly favour GBPAUD retesting its prior low of 1.5040 during Q3 and foresee a new low in the mid/high 1.40s in coming months. As a footnote, the Russian central bank (CBR) announced its intention to include AUD in FX reserves from September (to the equivalent of about 1% or USD 5bn.) could provide some additional support to AUD versus some existing CBR reserve currencies, which currently includes GBP. Trade idea: 1) Buy 3m RKO GBP Put/AUD Call Strike at 1.5350, Knocks Out at 1.4500. 2) Sell 3m GBP Call/AUD Put Strike at 1.6400. Zero Cost Structure (Spot Ref: 1.5300)

Daily Currency Summary

G3
The Greek Parliaments vote of confidence went along party lines and saw the reshuffled cabinet supported by a count of 155 to 143. Focus now turns to the passage of the budget on June 28. The government's majority in the confidence vote suggests that PM Papandreou retains control of his party and therefore that Parliament will pass the budget. This would in turn mean almost certain approval of the next tranche of aid at a special EcoFin on July 3. Negotiations over the second bailout package will continue but with Germany having conceded major ground last week, the obstacles now appear much less daunting. In the short-term, we favour a rebound in EURUSD to 1.4500 and EURCHF to 1.2167, a break here opens the way to further gains towards 1.23. Passage of the budget next week should see further gains for EUR and risk currencies. With the vote of confidence now over, we could see an overall rebound in risk, but USDJPY will remain dependent on the FOMC meeting later today. The FOMC is expected to firm up its language on keeping rates low for an "extended period" and apply this language to the Fed balance sheet as well. Weak data and a dovish Fed may spark a rally in risk, sparking USD weakness and keeping USDJPY well within its recent ranges. EURJPY gained momentum as optimism on Greece improved on Tuesday, and the result should see a further risk rally, pushing EURJPY above 116.00. Risk should also receive a boost from the firming of the Feds dovish tone; although JPY may be also poised to benefit from a dovish Fed.

EURUSD

USDJPY

JPY Crosses

EUR Bloc
Given MPC members' recent dovish statements, we would expect the BoE statement to come in on the dovish side. Both King and Fisher reiterated their view that rates should remain at current levels. Our view is that the BoE is unlikely to hike in 2011, or even 2012, despite rising inflation. Economic data continue to highlight the weakness in the economy, and wage growth remains subdued, leaving the argument favoring rate hikes less convincing. We see further GBP weakness ahead especially against EUR and AUD. Now that the Greek government won the confidence vote we could see EURCHF rally up to 1.2167. A break of this level could see further gains up to 1.23. Even though the government won by a small majority, it is a majority nonetheless, and implies that the Greek budget should pass as well next week. As such, as news headlines on Greece improves, EURCHF is set for further gains. While we expect no rate hikes from the Norges Bank today, the rhetoric will be closely watched especially since the bank was more dovish than expected at the last meeting. Currently, it looks like the Norges Bank intends to deliver the next rate hike in October, but we think it could come in September given strong fundamentals. Thus, the statement could come on the hawkish side with an upward revision to the rate profile while acknowledging peripheral concerns as risks. A bullish statement may help EURNOK push lower, breaking out of recent ranges. With the improvement in risk appetite SEK made a comeback. A dovish Fed today could help SEK add to Tuesdays strong momentum. If Swedish data on Wednesday (consumer and manufacturing confidence, economic tendency survey and unemployment) were to show resilience, SEK should see some renewed traction.

EURGBP

EURCHF

EURNOK

EURSEK

USD Bloc
Optimism on Greece has helped USDCAD fall back below 0.9800. With the government winning the vote of confidence, CAD should strengthen further as risk sentiment improves. Key support holds at 0.9675, the 50-day moving average. Yesterdays optimism on Greece has been confirmed by the government majority in the vote of confidence. AUDUSD has regained the 1.0600 level; downtrend resistance is at 1.0667, but a dovish FOMC could support overall risk appetite and allow for a break higher. NZ current account data was slightly better than expected coming in at -4.3% vs. -4.4%, but it is a deterioration from the previous month. Support for AUDNZD comes in at 1.2980; an improvement in risk should see the cross recovery towards 1.3200.

USDCAD AUDUSD NZDUSD

Foreign Exchange Strategy Wednesday, 22 June 2011 http://www.GlobalMarkets.bnpparibas.com

FX Forecasts*
USD Bloc EUR/USD USD/JPY USD/CHF GBP/USD USD/CAD AUD/USD NZD/USD USD/SEK USD/NOK EUR Bloc EUR/JPY EUR/GBP EUR/CHF EUR/SEK EUR/NOK EUR/DKK Central Europe USD/PLN EUR/CZK EUR/HUF USD/ZAR USD/TRY EUR/RON USD/RUB EUR/PLN USD/UAH EUR/RSD Asia Bloc USD/SGD USD/MYR USD/IDR USD/THB USD/PHP USD/HKD USD/RMB USD/TWD USD/KRW USD/INR USD/VND LATAM Bloc USD/ARS USD/BRL USD/CLP USD/MXN USD/COP USD/VEF USD/PEN Others USD Index *End Quarter Q2 '11 1.45 80 0.84 1.63 0.97 1.07 0.84 6.28 5.36 Q2 '11 116 0.89 1.22 9.10 7.77 7.46 Q2 '11 2.72 24.5 280 6.90 1.59 4.25 27.86 3.95 7.9 102 Q2 '11 1.23 3.00 8600 30.00 43.00 7.80 6.47 28.50 1070 45.00 20500 Q2 '11 4.10 1.60 465 11.70 1770 4.29 2.75 Q2 '11 74.21 Q3 '11 1.50 78 0.83 1.65 0.98 1.09 0.82 5.93 4.98 Q3 '11 117 0.91 1.25 8.90 7.47 7.46 Q3 '11 2.60 24.3 275 6.80 1.52 4.20 27.51 3.90 7.8 100 Q3 '11 1.22 2.95 8500 29.80 42.50 7.80 6.40 28.00 1060 45.50 20500 Q3 '11 4.18 1.58 450 11.40 1730 4.29 2.70 Q3 '11 72.30 Q4 '11 1.55 83 0.83 1.68 0.93 1.13 0.84 5.48 4.77 Q4 '11 129 0.92 1.28 8.50 7.40 7.46 Q4 '11 2.48 24.5 275 6.60 1.50 4.15 27.25 3.85 7.8 100 Q4 '11 1.21 2.90 8400 29.50 42.00 7.80 6.31 27.50 1050 45.00 20000 Q4 '11 4.25 1.55 435 11.10 1690 4.29 2.65 Q4 '11 70.76 Q1 '12 1.45 85 0.90 1.59 0.95 1.07 0.81 5.93 5.07 Q1 '12 123 0.91 1.30 8.60 7.35 7.46 Q1 '12 2.69 24.1 269 6.55 1.56 4.20 27.86 3.90 7.5 98 Q1 '12 1.21 2.87 8300 29.30 41.50 7.80 6.25 27.00 1040 44.50 20000 Q1 '12 4.34 1.53 425 11.00 1690 4.29 2.63 Q1 '12 74.87 Q2 '12 1.40 90 0.93 1.56 0.97 1.04 0.80 6.21 5.26 Q2 '12 126 0.90 1.30 8.70 7.37 7.46 Q2 '12 2.75 23.9 265 6.60 1.59 4.25 27.97 3.85 7.5 97 Q2 '12 1.20 2.85 8200 29.00 41.00 7.80 6.21 26.70 1030 44.00 20000 Q2 '12 4.43 1.55 430 10.90 1700 4.29 2.63 Q2 '12 77.62 Q3 '12 1.35 95 1.00 1.53 1.01 0.99 0.76 6.67 5.56 Q3 '12 128 0.88 1.35 9.00 7.50 7.46 Q3 '12 2.81 23.8 265 6.50 1.63 4.15 28.08 3.80 7.5 96 Q3 '12 1.19 2.83 8100 28.70 40.50 7.80 6.17 26.50 1020 43.50 20000 Q3 '12 4.51 1.56 435 11.00 1710 4.29 2.64 Q3 '12 80.72 Q4 '12 1.35 95 1.00 1.53 1.01 0.99 0.76 6.67 5.56 Q4 '12 128 0.88 1.35 9.00 7.50 7.46 Q4 '12 2.78 23.5 260 6.50 1.65 4.10 27.65 3.75 7.5 95 Q4 '12 1.18 2.80 8000 28.50 40.00 7.80 6.13 26.00 1010 43.00 20000 Q4 '12 4.60 1.58 440 11.10 1720 4.29 2.66 Q4 '12 80.72 Q1 '13 1.30 95 1.04 1.53 1.04 0.96 0.74 6.92 5.77 Q1 '13 124 0.85 1.35 9.00 7.50 7.46 Q1 '13 2.85 23.7 260 7.20 1.65 4.20 28.19 3.70 7.5 93 Q1 '13 1.17 2.77 7900 28.30 39.50 7.80 6.23 26.00 1000 43.00 20000 Q1 '13 4.69 1.59 442 11.10 1725 8.80 2.67 Q1 '13 82.99 Q2 '13 1.30 95 1.04 1.53 1.04 0.96 0.74 6.92 5.77 Q2 '13 124 0.85 1.35 9.00 7.50 7.46 Q2 '13 2.77 24.0 255 7.10 1.67 4.20 27.75 3.60 7.5 92 Q2 '13 1.16 2.75 7800 28.00 39.00 7.80 6.20 26.00 1000 42.50 20000 Q2 '13 4.78 1.60 445 11.17 1730 8.80 2.68 Q2 '13 82.99 Q3 '13 1.30 95 1.04 1.53 1.04 0.96 0.74 6.92 5.77 Q3 '13 124 0.85 1.35 9.00 7.50 7.46 Q3 '13 2.85 23.5 260 7.00 1.69 4.10 29.07 3.70 7.5 91 Q3 '13 1.15 2.73 7800 28.00 39.00 7.80 6.17 26.00 1000 42.50 20000 Q3 '13 4.86 1.61 447 11.25 1740 8.80 2.69 Q3 '13 82.99 Q4 '13 1.30 95 1.04 1.53 1.04 0.96 0.74 6.92 5.77 Q4 '13 124 0.85 1.35 9.00 7.50 7.46 Q4 '13 2.85 23.3 260 6.90 1.69 3.95 27.75 3.70 7.3 90 Q4 '13 1.14 2.70 7800 28.00 39.00 7.80 6.15 26.00 1000 42.00 20000 Q4 '13 4.95 1.62 450 11.30 1750 8.80 2.70 Q4 '13 82.99

Foreign Exchange Strategy Wednesday, 22 June 2011 http://www.GlobalMarkets.bnpparibas.com

FX - Global Strategy Contacts

Foreign Exchange
Ray Attrill James Hellawell Kiran Kowshik Mary Nicola Drew Brick Chin Loo Thio Robert Ryan Jasmine Poh Gao Qi Bartosz Pawlowski Diego Donadio Senior Currency Strategist Quantitative Strategist Currency Strategist Currency Strategist Head of FX & IR Strategy Asia FX & IR Asia Strategist FX & IR Asia Strategist FX & IR Asia Strategist FX & IR Asia Strategist Head of FX & IR Strategy CEEMEA FX & IR Latin America Strategist New York London London New York 1 212 841 2492 44 20 7595 8485 44 20 7595 1495 1 212 841 2492 raymond.attrill@americas.bnpparibas.com james.hellawell@uk.bnpparibas.com kiran.kowshik@bnpparibas.com mary.nicola@americas.bnpparibas.com drew.brick@asia.bnpparibas.com chin.thio@asia.bnpparibas.com robert.ryan@asia.bnpparibas.com jasmine.j.poh@asia.bnpparibas.com gao.qi@asia.bnpparibas.com bartosz.pawlowski@uk.bnpparibas.com diego.donadio@@br.bnpparibas.com

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