FX Focus

14 September 2016

Introducing CACIB’s FX fair value model: G10 VALFeX

 We introduce CACIB’s new FX fair value model for G10 VALFeX. The Valentin Marinov
model produces estimates of fair value of the G10 USD-crosses based Head of G10 FX Strategy
on relative productivity, external imbalances, terms of trade and rate +44 20 7214 5289
differentials. valentin.marinov@ca-cib.com

 We use panel cointegration analysis that combines dynamic and cross

sectional quarterly data spanning the G10 space, and going back till Jennifer Hau
2000. We aim to update the model on a standalone basis, and as part of FX Strategist
the FX Weekly and the Key FX Views publications. +44 20 7214 7468
jennifer.hau@ca-cib.com
 The model points at undervaluation for EUR, GBP and SEK; and
overvaluation for AUD, NZD and CHF. The results for the crosses
suggest that European currencies are looking cheap against Asian and
commodity block currencies.

 A trading strategy based on the model under-/overvaluation signals of

G10 VALFeX has returned on average 5.9% over the last 15 years with a
sharp ratio of 0.74. We will be using the model as input in our upcoming
G10 FX scorecard.

EUR and GBP look cheap, Antipodeans expensive

Our G10 FX fair value model – G10 VALFeX - suggests at present that both EUR
and GBP are quite undervalued with fair values for EUR/USD and GBP/USD
estimated to be 1.26 and 1.51 respectively at the end of Q216 (Figure 1). JPY
remains undervalued with the model suggesting a fair value of 98.6. At the other
end of the ranking are the two antipodean currencies where our model suggests
fair values of 0.70 and 0.62 for AUD/USD and NZD/USD respectively. Elsewhere,
the model results suggest that CHF is quite overvalued as well (USD/CHF fair
value of 1.04), followed by NOK and CAD (fair values for USD/NOK and
USD/CAD of 8.80 and 1.33 respectively). Last but not least, SEK looks
undervalued as well with the model giving a fair value for USD/SEK of 7.97.
To test the quality of the G10 VALFeX valuation signals, we construct a trading
strategy where we would buy/sell the currency against USD if the prevailing FX
spot rate is under/overvalued compared its ‘fair value’ at the end of the quarter.
We hold the position for the following quarter. The strategy has an average
annual return of 5.9% over the last 15 years with a Sharp ratio of 0.74 (Figure 2).

Fig 1. Misvaluation vs USD based on VALFeX in Q2 2016 Fig 2. Trading performance based on VALFeX (%)
120%
15%
100%
10%
80%
5%
60%
0%
40%
-5%
20%
-10%
0%
-15%
NZD AUD CHF NOK CAD JPY SEK EUR GBP -20%
Misvaluation vs VALFeX Mar-01 Jun-03 Sep-05 Dec-07 Mar-10 Jun-12 Sep-14

Source: Crédit Agricole CIB, OECD, IMF, Bloomberg Source: Crédit Agricole CIB

https://catalystresearch.ca-cib.com
FX Focus

For the trading strategy we adopt a weighted approach, whereby a larger

under/overvaluation compared to a short-term rolling standard deviation (on a per
currency pair basis) would have a larger weight in the portfolio. The trading
strategy only puts on a trade if the under/overvaluation is considered
‘meaningful’; we consider this to be greater than 1 standard deviation.
When looking at the breakdown of performance of the trading strategy by
currency pairs, we find that USD/JPY is by far the best performing currency pair,
with a sharpe ratio of almost 1. The performance for GBP and CHF are also fairly
decent with a sharper ratio of around 0.5, the performance for AUD, NZD, EUR
and SEK are modest, while the performance for CAD and NOK is relatively poor
under this strategy (Figure 3).

Fig 3. Trading performance based on G10 VALFeX

Currency AUD CAD CHF EUR GBP JPY NOK NZD SEK Portfolio
Annualised Return 1.3% -0.6% 1.9% 1.0% 1.9% 4.7% -3.7% 1.7% 1.6% 5.9%

Annual Risk 8.4 4.7 3.7 7.1 5.2 6.8 7.8 7.2 6.8 8.0

Sharpe Ratio 0.16 -0.12 0.50 0.14 0.37 0.69 -0.48 0.23 0.24 0.74

Max Drawdown 27% 21% 5% 15% 5% 7% 44% 14% 18% 12%

Source: Crédit Agricole CIB

In-depth analysis of the G10 VALFEx results

The gap between EUR/USD and its fair value has widened considerably since
the introduction of the ECB’s negative rates in June 2014 and QE in January
2015 (Figure 4). The policies were implemented in response to deteriorating
Eurozone fundamentals (weaker productivity relative to the US) and resulted in
tightening in the real rate differentials to the US. At the same time, the Eurozone
current account (CA) surplus and commodity terms of trade (ToT) improved
relative to the US, keeping our estimate of fair value well above current spot
levels. The G10 VALFeX estimate tracks spot moves and identifies overbought/
oversold levels in EUR/USD better than the purchasing power parity (PPP)
measure.

Fig 4. EUR undervalued compared to VALFeX and PPP Fig 5. GBP undervalued compared to VALFeX and PPP

1.6 2.1
1.5 2.0
1.4 1.9
1.3 1.8
1.2 1.7
1.1 1.6
1.0 1.5
0.9 1.4
0.8 1.3
Mar-00 Aug-02 Jan-05 Jun-07 Nov-09 Apr-12 Sep-14 Mar-00 Aug-02 Jan-05 Jun-07 Nov-09 Apr-12 Sep-14
EUR/USD PPP VALFeX GBP/USD PPP VALFeX

Source: Crédit Agricole CIB, OECD, Bloomberg Source: Crédit Agricole CIB, OECD, Bloomberg

The GBP/USD undervaluation is a relatively recent development and can be

attributed almost entirely to the selloff ahead of the Brexit vote (Figure 5). While
weaker UK external imbalances and lower real rates did not help the pound,
better productivity and improving terms of trade relative to the US stopped the fair
value for GBP/USD from falling in tandem with FX spot since the beginning of
2016. Recent history indicates that GBP/USD deviations from fair value of the
current magnitude are difficult to sustain. Similar conclusions could be drawn
from the valuation analysis based on PPP. The combined results for EUR and
GBP suggest that the cross is trading at close to fair value at present (Figure 6).

14 September 2016 2
FX Focus

Fig 6. EUR/GBP close to VALFeX but well below PPP Fig 7. JPY looks undervalued compared to VALFeX

1.00
150.0
0.95
140.0
0.90
0.85 130.0
0.80 120.0
0.75 110.0
0.70 100.0
0.65 90.0
0.60 80.0
0.55 70.0
Mar-00 Aug-02 Jan-05 Jun-07 Nov-09 Apr-12 Sep-14 Mar-00 Aug-02 Jan-05 Jun-07 Nov-09 Apr-12 Sep-14
EUR/GBP PPP VALFeX USD/JPY PPP VALFeX

Source: Crédit Agricole CIB, OECD, Bloomberg Source: Crédit Agricole CIB, OECD, Bloomberg

The USD/JPY drop this year has brought the pair closer to the fair value implied
by G10 VALFeX although it remains overvalued (Figure 7). Improving external
imbalances and terms of trade in Japan as well as renewed widening of real rate
spreads to the US could explain the level of the fair value. At the same time, the
Japanese productivity remains inferior to the US one and that could keep a floor
for USD/JPY fair value and FX spot in the coming quarters. The model result
differs from the PPP fair value, which suggests that USD/JPY is no longer
expensive.

Fig 8. CHF overvalued relative to VALFeX and PPP Fig 9. SEK undervalued relative to VALFeX and PPP

11.0
1.8
10.0
1.6
9.0
1.4
8.0
1.2 7.0
1.0 6.0

0.8 5.0
Mar-00 Aug-02 Jan-05 Jun-07 Nov-09 Apr-12 Sep-14 Mar-00 Aug-02 Jan-05 Jun-07 Nov-09 Apr-12 Sep-14
USD/CHF PPP VALFeX USD/SEK PPP VALFeX

Source: Crédit Agricole CIB, OECD, Bloomberg Source: Crédit Agricole CIB, OECD, Bloomberg

CHF remains the most overvalued G10 major currency according to G10
VALFeX (Figure 8). This reflects the impact of inferior productivity and terms of
trade relative to the US, which more than outweigh the effect of the Swiss
superior CA balance as well as the renewed tightening in the relative rate
spreads to the US. In contrast, SEK looks cheap with its fair value boosted by
superior productivity and improving terms of trade (Figure 9). A look at the PPP
fair value would suggest that the results for CHF are consistent with the findings
of our analysis. In the case of USD/SEK, PPP points at undervaluation.
The Antipodeans are the most expensive currencies in G10 according to G10
VALFeX (Figures 10 and 11). This reflects still considerable external imbalances,
weaker terms of trade, worsening productivity and shrinking real rate advantage
vis-à-vis the US (in the case of NZD). The results further suggest that AUD/NZD
is quite undervalued at present.

14 September 2016 3
FX Focus

Fig 10. AUD overvalued relative to VALFeX and PPP Fig 11. NZD overvalued relative to VALFeX and PPP

1.1 0.9
1.0 0.8
0.9
0.7
0.8
0.6
0.7
0.5
0.6
0.5 0.4

0.4 0.3
Mar-00 Aug-02 Jan-05 Jun-07 Nov-09 Apr-12 Sep-14 Mar-00 Aug-02 Jan-05 Jun-07 Nov-09 Apr-12 Sep-14
AUD/USD PPP VALFeX NZD/USD PPP VALFeX

Source: Crédit Agricole CIB, OECD, Bloomberg Source: Crédit Agricole CIB, OECD, Bloomberg

In the case of the two oil currencies NOK and CAD, our fair value model points at
overvaluation albeit less pronounced than in the case of the Antipodeans
(Figures 12 and 13). Still weak terms of trade in addition to lingering external
imbalances in the case of CAD and inferior relative productivity in the case of
NOK seem to keep the fair value estimates close to the recent lows. With the
notable exception of CAD, the results for all four G10 commodity currencies are
broadly consistent with the message we get from the PPP analysis.

Fig 12. CAD overvalued relative to VALFeX but not PPP Fig 13. NOK overvalued relative to VALFeX and PPP

1.7 10.0
1.6
9.0
1.5
1.4 8.0
1.3
7.0
1.2
1.1 6.0
1.0
5.0
0.9
0.8 4.0
Mar-00 Aug-02 Jan-05 Jun-07 Nov-09 Apr-12 Sep-14 Mar-00 Aug-02 Jan-05 Jun-07 Nov-09 Apr-12 Sep-14
USD/CAD PPP VALFeX USD/NOK PPP VALFeX

Source: Crédit Agricole CIB, OECD, Bloomberg Source: Crédit Agricole CIB, OECD, Bloomberg

Model specification and empirical methodology

We model the relationship between exchange rates and country fundamentals
using a stock-flow model for the determination of equilibrium real exchange rate
that was popularised by Alberola et al. (1999) 1. Our objective is to arrive at
comparable FX fair value estimates using the same cross-country variables in an
analytically rigorous way. In the model, the real exchange rate 𝑞𝑞 is defined as the
ratio of the foreign (𝑝𝑝∗ ) to domestic (𝑝𝑝) price level expressed in domestic prices
(in this case USD) using the nominal exchange rates (all in logarithms):
𝑞𝑞 = 𝑠𝑠 + 𝑝𝑝∗ − 𝑝𝑝
We denote with 𝛼𝛼 the share of tradable goods in the price index, 𝑝𝑝𝑇𝑇 is the level of
tradable goods and 𝑝𝑝𝑁𝑁𝑁𝑁 – the level of non-tradable goods (both in logarithms).
Using the notation from the above equation, we can write the real exchange rate
as a function of tradables and non-tradables:
∗ ∗ ∗
𝑞𝑞 = �𝑠𝑠 + 𝑝𝑝𝑇𝑇 − 𝑝𝑝𝑇𝑇 � + (1 − 𝛼𝛼)[�𝑝𝑝𝑁𝑁𝑇𝑇 − 𝑝𝑝𝑇𝑇 � − (𝑝𝑝𝑁𝑁𝑁𝑁 − 𝑝𝑝𝑇𝑇 )]

1
Alberola, E., Cervero, S., Lopez, H. And A. Ubide, 1999, Global Equilibrium Exchange Rates:
Euro, Dollar, “Ins”, “Outs”, and outher major currencies in a panel cointegration framework, IMF
WP No. 175 FX Strategy Focus 15 December 2008

14 September 2016 4
FX Focus

We refer to the first term in the above equation as the relative prices of tradable
goods between the US and each of the G9 economies and denote it by 𝑞𝑞 𝑇𝑇 . It is
determined by the equilibrium condition of their balance of payments (BoP). The
second term, denoted by 𝑞𝑞 𝑁𝑁𝑁𝑁 , is the ratio of the foreign to domestic relative prices
of non-tradable goods. The greater the price of non-tradables relative to tradables
is, the more productive the economy. This is a reflection of the famous Balassa-
Samuelson effect. Productivity gains in the domestic economy (the US) relative to
abroad are reflected in an appreciating real exchange rate (𝑞𝑞 is lower).
The equilibrium exchange rate, 𝑞𝑞, should be consistent with simultaneous
external and internal equilibriums.
𝑇𝑇 𝑁𝑁𝑁𝑁
𝑞𝑞 = 𝑞𝑞 + 𝑞𝑞
𝑇𝑇
The external equilibrium rate, 𝑞𝑞 , clears the tradable goods market and is
characterized by the achievement of the desirable stock of net foreign assets
(NFA). Adjustment to equilibrium is reflected in the evolution of the CA balance,
which in turn leads to accumulation of NFA. CA is reflecting the sum of the
balance of trade and the net income on foreign holdings. It thus depends on the
relative prices of tradable goods between the US and the rest of G10. A
sustainable balance of payments (BoP) positions is characterized by a CA
financed by sustainable accumulation of capital flows. Assuming that 𝐹𝐹 is the
desired level of NFA position one could derive the external equilibrium exchange
𝑇𝑇
rate, 𝑞𝑞 , from the BoP equilibrium:
𝑇𝑇
𝛾𝛾𝑞𝑞 + 𝑖𝑖 ∗ 𝑓𝑓 = 𝜂𝜂(𝐹𝐹 − 𝑓𝑓), 𝛾𝛾, 𝜂𝜂 > 0
where 𝑖𝑖 ∗ is the international interest rate, 𝑓𝑓 is the stock of net foreign assets and
𝑇𝑇
𝛾𝛾𝑞𝑞 represents the trade balance expressed as a function of the relative price of
tradable goods. If a country (US) is running a CA deficit that results in a build-up
of foreign liabilities above the desired level, the above equation suggests that the
𝑇𝑇
currency of the economy would depreciate (𝑞𝑞 will grow) on the back of concerns
about the sustainability of the CA deficit and the need to improve the trade
balance.
𝑁𝑁𝑁𝑁
The internal contribution to the equilibrium exchange rate - 𝑞𝑞 - reflects the
relative prices of non-tradable goods across countries. These are determined
internally in each of the economies and depend on the relative productivity of the
tradable and non-tradable sectors. Productivity gains in the tradable goods sector
should spill over into non-tradable goods sector since the non-tradable goods
market clears domestically. This is once again the Balassa-Samuelson effect
𝑁𝑁𝑇𝑇
discussed above and 𝑞𝑞 is our way to compare the relative sectoral productivity
across economies (productivity) provided that equilibriums are achieved
domestically:
𝑁𝑁𝑁𝑁 ∗ ∗
𝑞𝑞 = (1 − 𝛼𝛼)�(𝑦𝑦 𝑇𝑇 − 𝑦𝑦 𝑁𝑁𝑇𝑇 � − (𝑦𝑦 𝑇𝑇 − 𝑦𝑦 𝑁𝑁𝑁𝑁 )]
where 𝑦𝑦𝑖𝑖 stands for sector productivity in sector 𝑖𝑖 (𝑖𝑖 = 𝑁𝑁𝑁𝑁, 𝑇𝑇). We combine the
last three equations to get an expression for the equilibrium real exchange rate:
∗ ∗
𝑞𝑞 = 𝛾𝛾 −1 [𝜂𝜂𝜂𝜂 − (𝑖𝑖 ∗ + 𝜂𝜂)𝑓𝑓] + (1 − 𝛼𝛼)[�𝑦𝑦 𝑇𝑇 − 𝑦𝑦 𝑁𝑁𝑇𝑇 � − (𝑦𝑦 𝑇𝑇 − 𝑦𝑦 𝑁𝑁𝑁𝑁 )]
The equilibrium real exchange rate is therefore a negative function of the NFA or
𝑓𝑓 in the above equation – implying that greater NFA in the home country (US)
should result in lower 𝑞𝑞. At the same time, the equilibrium real exchange rate is a
negative function of the productivity of the home country. The more productive
the US, the lower its 𝑞𝑞.
A direct rendition of the theoretical framework above into an econometric model
would require a proxy for the relative NFA of the G9 countries vs the US. One
such proxy can be constructed by accumulating the CA imbalances of the G9
economies and comparing them to the US. In the final G10 VALFeX model
specification we use the relative CA imbalances of the G9 countries vs the US,
however. This is because we found that they are more strongly correlated with
our dependent variable than our NFA proxy.
We took further steps to improve the quality of our fair value estimates by adding
to the model drivers of the G10 external imbalances with more direct impact on
the FX markets like commodity ToT and real interest rates spreads. In this way
we try to address persistent deviations of FX spot from fair value estimates based

14 September 2016 5
FX Focus

on NFA alone. Such deviations arise because the latter does not account for
market expectations about the future path of the external imbalances or the
countries’ ability to finance persistent CA deficits over longer periods of time.
The inclusion of commodity ToT makes our analysis of the relationship between
FX and external imbalances more forward looking. For example, investors’
expectations that improving commodity ToT will boosts the outlook for the trade
account of commodity exporters and keep commodity currencies supported
despite looming trade and CA deficits. We use commodity ToT because unlike
the broader terms of trade version the variable is predominantly driven by global
factors like the USD and the price of oil that make it particularly relevant in our
panel cointegration model.
In addition, the inclusion of real rate and bond yield spread allows us to model the
ability of some G10 countries to fund their sizeable CA deficits and keep their
currencies supported. In that, higher short rates and long-term bond yields
resulting in wider spreads to the US, should attract portfolio inflows over time. All
that should keep the higher-yielding G10 currencies supported despite looming
external imbalances.
We estimate a model of the following form:
𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅 𝐺𝐺9/𝑈𝑈𝑈𝑈𝑈𝑈 = 𝑞𝑞(𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝, 𝐶𝐶𝐶𝐶, 𝑇𝑇𝑇𝑇𝑇𝑇, 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠)
As dependent variables we use real exchange rates or the G10 USD-crosses
adjusted for the relative differences in price levels between the G9 economies
and the US. Turning to the independent variables, we use the Balassa-
Samuelson measure of relative productivity discussed above. To this end, for
each country, we construct the ratio of its CPI and PPI as proxies for the prices of
non-tradables and tradables goods. We then calculate relative productivity
measures for G9 currencies vs USD. As a second independent variable we use
the differences between the CA balances between the G9 and the US expressed
as a percentage of their respective GDP. As a third independent variable we use
the ratio of the G9 commodity ToT and the USD. Last but not least, on the right-
hand side of the equation we include the 2Y rate, and 10Y bond yield real
spreads between G9 economies and the US.
Our econometric results suggested that the most important driver of the G9 USD-
crosses was relative productivity. It was followed by the relative CA imbalances,
the real rate and bond yield spreads, and the commodity ToT.
We use a panel cointegration econometric model to determine the fair value of
USD-crosses. We use a balanced panel of quarterly data with 9 cross-section
and 66 dynamic observations. Before estimating the empirical model, we make
sure that the series are non-stationary by running panel unit root tests. We then
run panel cointegration tests to verify the existence of a cointegration relationship
among the variables. A group of series is said to be cointegrated when all group-
members are non-stationary and their linear combination is stationary. The
stationary linear combination can be interpreted as a long-run equilibrium
relationship between the currencies and their drivers, and subsequently be used
for the calculation of the fair-value exchange rates. The panel cointegration tests
(Pedroni, Kao and Fisher) all indicated the existence of a cointegration
relationship among the series.
When fitting the model we run Whu-Hausman and Breuch-Pagan model
specification tests. Both indicated that the fixed effects cross section specification
is to be preferred to the random effects one. The fixed effects model specification
implies that we conduct the analysis using deviations of the level data from their
cross-section means. The econometric model is estimated in logarithms and has
a good overall fit with R2 reaching 80% for our final specification. All coefficients
have the expected signs and the most important driver seems to be relative
productivity.
Based on the above results we estimate a panel regression model of the
following form:
𝐹𝐹𝐹𝐹𝑖𝑖𝑖𝑖 = 𝛼𝛼𝑖𝑖 + 𝛽𝛽1 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑖𝑖𝑖𝑖 + 𝛽𝛽2 𝐶𝐶𝐶𝐶𝑖𝑖𝑖𝑖 + 𝛽𝛽3 𝑇𝑇𝑇𝑇𝑇𝑇𝑖𝑖𝑖𝑖 + 𝛽𝛽4 2𝑌𝑌𝑖𝑖𝑖𝑖 + 𝛽𝛽5 10𝑌𝑌𝑖𝑖𝑖𝑖 + 𝜂𝜂𝑖𝑖𝑖𝑖
where 𝐹𝐹𝐹𝐹𝑖𝑖𝑖𝑖 represents the vector of dependent variables – real G10 USD
exchange rates 𝑖𝑖 (𝑖𝑖 = 1,2, … 9) in period 𝑡𝑡. 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑖𝑖𝑖𝑖 represents the vector
with the relative productivity variables for each G9 country 𝑖𝑖 in period 𝑡𝑡. 𝐶𝐶𝐶𝐶𝑖𝑖𝑖𝑖 is

14 September 2016 6
FX Focus

the vector with the relative current account balances between the G9 country 𝑖𝑖 in
period 𝑡𝑡 and the US. 𝑇𝑇𝑇𝑇𝑇𝑇𝑖𝑖𝑖𝑖 is the vector of the terms of trade variables for each
G9 country 𝑖𝑖 in period 𝑡𝑡 relative to the US. 2𝑌𝑌𝑖𝑖𝑖𝑖 and 10𝑌𝑌𝑖𝑖𝑖𝑖 are the vectors of the 2Y
and 10Y bond yields for each G9 country 𝑖𝑖 vs the US in period 𝑡𝑡. 𝛼𝛼𝑖𝑖 is the fixed
(time invariant) effect for country 𝑖𝑖. 𝜂𝜂𝑖𝑖𝑖𝑖 is a white noise error term with 𝜂𝜂𝑖𝑖𝑖𝑖 ~
𝜂𝜂𝑖𝑖𝑖𝑖 �0, 𝜎𝜎𝜂𝜂2 �.

14 September 2016 7
FX Focus

Global Markets Research contact details

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+852 2826 1553 +48 22 573 18 40
Alexander Pecherytsyn
Chief Economist – Crédit Agricole Bank Ukraine
+38 44 493-9014
Guillaume Tresca
Senior Emerging Market Strategist
+33 1 41 89 18 47
Foreign Exchange David Forrester Valentin Marinov Vassili Serebriakov
FX Strategist Head of G10 FX Research & Strategy FX Strategist
+852 2826 1529 +44 20 7214 5289 +1 212 261 3309
Jennifer Hau
FX Strategist
+44 20 7214 7468
Manuel Oliveri
FX Strategist
+44 20 7214 7469
** employee(s) of Crédit Agricole Securities (USA), Inc.

Certification
The views expressed in this report accurately reflect the personal views of the undersigned analyst(s). In addition, the undersigned analyst(s) has
not and will not receive any compensation for providing a specific recommendation or view in this report.

Valentin Marinov Jennifer Hau

Important: Please note that in the United States, this fixed income research report is considered to be fixed income commentary and not fixed
income research. Notwithstanding this, the Crédit Agricole CIB Research Disclaimer that can be found at the end of this report applies to this report
in the United States as if references to research report were to fixed income commentary. Products and services are provided in the United States
through Crédit Agricole Securities (USA), Inc.

Foreign exchange disclosure statement to clients of CACIB

http://mediacommun.ca-cib.com/sitegenic/medias/DOC/85478/2015-12-08-foreign-exchange-disclosure-statement-to-clients-of-cacib.pdf

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FX Focus

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