Currency Watch List 1

Currency
Watch List
JarrattDAVIS
real trader.
real results. verified.
EUR
ECB summary
The ECB are still very focused on inflation because it is way
below their 2% target and the main way a central bank
increases inflation is by cutting interest rates, the ECB cut
rates for a second time this year in their latest meeting.
ECB have stated a weaker Euro is positive for the recovery
The bank have now started their bond buying programme
and are looking to expand it over the coming weeks
Key Economic Indicators

watched by ECB:
EU Inflation (Target 2%)

Next update
03 November 2014
JarrattDAVIS
real trader.
Currency Watch List
EURO
Sell
Central Bank Analysis

The ECB are now in the
midst of the next round of
easing which is designed
to give further stimulus to
the flagging EU economy.
After cutting rates several times over the past 12 months they have now
begun their ABS bond buying programme. They have already purchased
French, Portuguese, Spanish, Italian and German bonds so far, and are
buying in parcels of 5 20 million Euros.
The ECBs covered bond purchases program came in at EUR 1.7bln on
October 27th 2014, slightly above the markets expectations.
The market will be paying VERY close attention to this programme and
most importantly how it starts to impact the inflation data (CPI) from Europe.
If there is still no material improvement then the ECB will be expected to add
further measures which will be seen as even more negative for the Euro.
Of note, last week, Hawkish ECB member Nowotny stated that he
wouldnt rule out QE which the market saw as very dovish (Coming from a
Hawk) and thus another step closer to full blown QE.
As we stand we need to see how this programme plays out and watch
the next few CPI readings to get an idea of what the ECBs next move will
be.
JarrattDAVIS
The easiest way to trade the Euro right now is to sell it

against the stronger currencies on any rallies that occur from
short term sentiment
real trader.
Currency Watch List
The market is concerned that purchasing bonds in this way may not be
enough to halt the economic slump and that further measures may need to
be taken. The ECB have responded to this by stating that they are prepared
to use further measures if needed, including corporate bond buying which is
seen as more risky.
JPY
BOJ summary
Key Economic Indicators watched by BOJ:
Inflation (Target 2%)
Markets were expecting further measures but these

came much sooner
The bank have now demonstrated that they will do
whatever it takes to hit its 2% inflation target by end of
2015
Next update
03 November 2014
JarrattDAVIS
The bank revised their growth and inflation forecasts

lower
real trader.
Currency Watch List
Japanese Yen
Sell
BOJ unexpectedly increased the amount of stimulus it

injects into the economy

After Kuroda announced further QE he also stated that the bank is
prepared to take further action if required and do whatever it takes to
reach the 2% target for CPI.
This caused the markets to sell off JPY in huge amounts and this
sentiment is expected to continue over the coming months.
All eyes are now on the CPI data from Japan, because as this shows
improvement the bank will look to withdraw stimulus thus reversing
the recent weakening. As it stands we expect the currency to continue
weakening into 2015 and any pullbacks being seen as opportunities to get
back into the market at a better price.
Look for JPY to be one of the weakest currencies over
the coming months and try and sell it against stronger
currencies, especially those that are going in the opposite
direction I terms of monetary policy.
JarrattDAVIS
real trader.
Currency Watch List
At the latest bank of

Japans meeting they
revised down their 2014
inflation forecast to 1.2%
from 1.3% showing that
they now recognize that
there are still challenges
ahead for them to hit their
inflation target.
NZD
RBNZ summary

watched by the RBNZ:
Inflation (Target 2 3%),

Exchange rate of NZDUSD
(Do not want it to reach
0.9000 levels) they in fact
want to see it at 0.6500
Global Milk Prices Dairy
trade accounts for 7% of
New Zealands GDP
Next update
03 November 2014
JarrattDAVIS
real trader.
New Zealand has one of the most attractive investment

yields and the NZD is a very attractive carry trade,
especially against currencies with very low interest rates
The bank removed any reference to further rate hikes to
follow the ones triggered in 2014
They cited a concern over falling CPI
Currency Watch List
New Zealand
Dollar
Buy
The RBNZ have intervened to sell NZD aggressively during

August 2014 and have not ruled out further action to get
NZD weaker against the USD

The bank are also determined to weaken the currency at any opportunity
they get after stating that they would like to see the NZDUSD rate at around
0.6500.
The reason inflation has dropped off is due to global milk prices falling
which make up to 7% of the GDP. Because they have fallen so much this
has dragged down the overall inflation figure for the nation as a whole.
This means that we should pay particular attention to these milk prices
because when they start recovering this could see inflation once again
become a trigger for further rate hikes.
When these rate hikes come back onto the agenda we expect to see
traders once again gravitate to the NZD and start buying it back.
The easiest way to trade the currency right now is to buy it
against weaker currencies with low interest rates, because
despite the bank being so dovish it remains a very attractive
carry trade, for traders looking for yield.
Do not buy this currency against stronger currencies that are
expecting a rate hike in 2015.
JarrattDAVIS
real trader.
Currency Watch List
The RBNZ have now

ended any prospects for
further rate hikes in the
next 6 months by simply
removing any reference
to the need for further
tightening. This gives
the NZD extra weakness
against those currencies
that are on the cusp of
rate hikes during the same
period.
CHF
SNB summary

watched by SNB:
Exchange rate of EURCHF

currency pair (They are
protecting 1.2000)
Next update
03 November 2014
JarrattDAVIS
CHF is naturally a safe haven investment and traders

tend to buy it as a reserve, causing it to strengthen
during volatile times and market crashes, the SNB are
actively trying to discourage this buying and have so far
spent billions keeping the value of the currency lower
than it naturally would be.
The prudent course of action is to err on the side of the
central bank and sell CHF against strong currencies,
whilst being aware of this safe haven phenomenon.
Analysts expect the bank to hike their rate in mid 2016
real trader.
Currency Watch List
Swiss Franc
Sell
SNB continue to defend the floor on the EUCHF pair,

they see it as the best way to protect their policy targets,
although this is not indefinite.

The flip side is that they change their policy extremely infrequently which
makes the CHF a very stable currency to trade.
The current status is that they wish to keep the price of their currency
as low as possible, particularly against the Euro, as Europe is its largest
trading partner. They are constantly battling with the market over this
which sees the CHF as a very solid, stable currency to invest in during
hard economic times.
They have recently stated that they have not intervened for months
and that the fair price fundamentally for the EURCHF pair is at around
1.2800.
They have also stated that a negative interest rate is a possibility but
not something they are looking to adopt as part of their plan a policy.
Market analysts (UBS Bank particularly) have stated that the SNB are
facing an extreme dilemma of trying to keep CHF so low and that the low
rates are causing the housing market is getting overheated and unhealthy.
We have a situation where the SNB continue to talk the currency down
and desperately try and stop it getting stronger while at the same time the
market starting to realise that rates may have to go up at some point over
the next 12 18 months regardless of what the bank say.
JarrattDAVIS
real trader.
Currency Watch List
The Swiss National Bank

are notoriously secretive
and low key about their
thoughts on monetary
policy, and chose only to
speak a few times per
year.
As we stand we side with the SNB and remain bearish but are
sensitive to what the wider market think and say If more analysts and
economists start calling for higher rates we could see a real momentum
form which could strengthen CHF in the medium term.
During these times the CHF performs well in the short term along with
Japanese Yen.
The best way to trade CHF is against strong currencies
that have solid upside potential, and particularly currencies
that have a higher interest rate than Switzerland, while being
very careful at times of market panic when traders will flock
to the currency as a safety play.
JarrattDAVIS
real trader.
Currency Watch List
On the other side of the coin the CHF is a very stable currency that
attracts investors during times of safe haven flows and market panics.
Because of this stability traders do like to use the currency as a hedge
against bad times in the stock market or when traders are generally trying
to avoid risk for one reason or another.
Fed summary
USD
They are upbeat about overall outlook including

unemployment rate and growth
Concerns include weaker than expected inflation data
and quality of labour market recovery
They have now fully ended their QE programme and are
looking towards their first rate hike

watched by the Fed:
Inflation (Target 2%),

Employment figures
(Looking for sustained
improvement)
Next update
03 November 2014
JarrattDAVIS
real trader.
As it stands the Fed are generally considered to be in the

lead when it comes to raising rates next with the first hike
expected in mid-2015
Currency Watch List
US Dollar
Buy

The Latest FOMC was
much anticipated and
was much more hawkish
than the market was
anticipating.
Going into the event the market was expecting the fed to be dovish and
there were even rumours that they might avoid ending QE completely amid
concerns about the recovery losing momentum.
These concerns were short lived as they did indeed end QE, and despite
the fact that the phrase considerable time remains part of their statement
the markets now know that the next move for the Fed is a rate hike.
This is a medium term goal and the positive momentum should remain
through to the end of the year, with traders looking to keep buying USD
against the weaker currencies.
From here on in we are watching the data very closely and using this to
guide us in how we think the Fed will move next.
The simplest way to trade the USD right now is to buy it
against the weaker currencies, every time these pairs pull
back
JarrattDAVIS
real trader.
Currency Watch List
From this point in all eyes will be on the CPI data because this needs to
start showing at least some signs of building momentum towards hitting the
feds 2% target in order for those rate hike expectations to be solidified.
AUD
RBA summary

watched by RBA:
Australian Inflation (Target

2- 3%) - RBA comments
and speeches (looking for
less neutral comments)
Next update
03 November 2014
JarrattDAVIS
real trader.
Growth is sluggish while the property market risks

overheating presenting a dilemma of hold or hike on rates
Analysts speculate a hike in the third quarter of 2015 due
to the RBAs cautiously positive outlook on the economy
RBA still claim that AUD is overvalued against the USD
Currency Watch List
Australian Dollar
Buy

They also stated that the current price levels are unhelpful to the current
economic difficulties that Australia is facing.
This has led to speculation that the bank could take measures beyond
merely talking the currency down, which could lead to fresh weakness.
These rumours however are not tradable.
The question still remains: Will the RBA chose to battle the sluggish
economy or the overheating housing market and whichever way they go
could mean either rate hikes or cuts in the near future.
For now they will wait and see and this neutral stance should keep AUD
supported against those currencies with a much more negative outlook for
rates.
We do need to keep a very close eye on their comments and movements
as we head into 2015 because we are at a stage where they could quite
feasibly go either way with their rate depending on which economic issue
they perceive to be most threatening.
The best way to trade AUD at this stage is to sell it on the
rallies against stronger currencies while looking for longer
term buying opportunities against very low interest rate
currencies.
JarrattDAVIS
real trader.
Currency Watch List
Recently, the bank has

stated that the currency is
overvalued and that based
on the fundamentals the
currency still has some
way to fall.
GBP
BOE summary
Key Economic Indicators watched by BOE:
Inflation (Target 2%),

Employment data (Looking
for quality, particularly in areas
such as wages and average
earnings)
Next update
03 November 2014
JarrattDAVIS
real trader.
Data has been very mixed / weak of late adding to

speculation that a hike may be further away
Two members of the BoE have dissented in favour of
hiking rates in September 2014
The BoE committee is generally opposed to hiking too
soon
General market expectations are now for a hike in around
September 2015
Currency Watch List
Great Britain
Pound
Buy
The bank have made it clear that any rate hikes is very
data dependent and that they will be watching the
recovery before committing to any timings

This removes all pressure to hike and could now cause the bank to delay
their rate hike until much later in 2015 than previously thought.
Average earnings also remained fairly weak, despite coming out in line
with analysts expectations.
On top of this we have had extremely dovish minutes showing that the
bank is concerned about struggling growth in the Euro zone and the impact
that this will have on the UKs own recovery. The market now expects any
hike to come at the later end of 2015.
This is still data dependent and if we get a run of positive data (especially
CPI) the tone could shift and rate expectations could once again be brought
back to early 2015.
General data has not been particularly impressive.
The fact that this simply supports the banks apprehension to hike at any
time soon, we will be looking to sell the GBP, particularly against USD.
For longer term traders, these short term GBP sell offs
against clearly weaker currencies should be viewed as an
opportunity to start buying it back for longer term positions
due to the fact that the UK will still hike their rate much before
the other banks.
JarrattDAVIS
real trader.
Currency Watch List
Recent data from the

UK has given the bank
more room to breathe
when considering their
first rate hike. This was
highlighted by the October
CPI reading which came
out much lower than the
expected number (1.2%)
CAD
BOC summary

watched by BOC:
CPI Inflation (Target 1-3%),

Major headline figures, GDP,
Unemployment
Next update
The BoC have removed their forward guidance which

means they will no longer be telling the market their bias
on rates
More recently Poloz has stated that a sign of a truly
strengthening economy is if Canadians were working
longer hours
03 November 2014
JarrattDAVIS
The main issue for BoC is the housing bubble that is

forming in Canada along with rising debt levels that call for
an increase in rates to stop them spiralling out of control
real trader.
Currency Watch List
Canadian Dollar
Sell
Poloz has stated that even if economic data shows an

incredible recovery overnight there will still be plenty of
room for recovery and thus no rush to raise rates.

This leaves a huge risk of a major surprise. To counter this we need to be
watching the things he is watching VERY closely for signs that a change to
the rate may be coming.
To help with this he has recently placed heavy focus on the length and
amount of hours that Canadians are working. This means that he is making
labour market slack as a key indicator that will help drive a decision on when
to start hiking their rate, which has been at 1% since 2010.
GDP figures came out at -0.1% which was worse than the market was
expecting which in turn now adds to the overall bearish outlook on The CAD
as a currency.
We still expect the next move to be a hike but have no idea when, but
current bets suggest some point at the start of 2016.
We do know that they want to hold off from any hikes for as long as
they can but are coming under increasing pressure via a housing bubble
and increased debt levels in Canada. These factors can be cured simply
by interest rate hikes but by increasing the rate they will hamper their fragile
economic recovery which is struggling to gain any momentum at this stage.
JarrattDAVIS
real trader.
Currency Watch List
Poloz has recently stated

that he will adjust rates
without notice when the
BoC deem it appropriate
and it is up to the markets
to figure out when that
will happen based on the
data.
Recent data has been mixed to say the least with no real signs of a firm
recovery taking hold across the full spectrum of the economy. As long as
this continues then the bank will be perfectly happy to hold as they are
and leave rates unchanged.
All Canadian data is fairly irrelevant unless we start to see a clear trend
of either positive or negative numbers that could sway the bank either way.
We do not expect this out look to change over the coming 3 months.
The simplest course of action on the CAD is to sell it
against those currencies that are considering rate increases
within the next 12 months.
JarrattDAVIS
real trader.
Currency Watch List
They recently removed the wording which stated that the bank were
neutral on their rate policy which is designed to remove any hints at a
rate direction.
JarrattDAVIS
real trader.
141101
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Currency

Key Economic Indicators

EU Inflation (Target 2%)