9 January 2018
9 January 2018
FX Blueprint
Figure I: For the dollar it is 2004-06 all over again
Dollar index in different G10 rate environments
red = USD a top-4 high-yielder r 160
150
2005-06 even Moog 140
dollar dropped in 130
Fed hiked 120
110 160
150
140
130
120
110
100
90
80
70
94 92 00 08 17 76 li
Sway Mare &S. Enneg Awn UP [Figure 2: US assets are already extremely expensive
record high valuation in
4%k E expenses %%"•*: US assets 100%
2%IIY 80%
0%
60%
-2%
40%
-4%
100 -696 iLk A- 20%
90 -8% chimp 0%
80 62 66 70 74 79 82 86 90 94 98 02 06 10 14
70 bask balance (Ills)
—combined valuation• of US bonds and equities
Men Pawn Clark Blanbin *win LL onroppreana. an of S&P500AI milord
ACM nom pendant
Figure 3: Rising deficits historically S bearish I Figure 4: Dollar has already priced in Fed tightening path
2%
0%
-2% —US twin deficits as pa GDP (Ihs) i leo 30% Cumulative move In trade-weighted FX on central
—US$ Trade Weighted Index lagged ?yrs F 25% bank announcement days
. , . I. 160 USD moves on 20%
IO l- 140 15% Romani eSetleCeS3 NIC lissom", 'Cullen &
Il. 120 10%
5%
t'00 0% IA Aiii a.
Iliifs'
8° -5% Siert of unconventional . EUR moves on projected US -10% f 60 policy F:GP thr,etirvis.
tax plan i •15% Dia03 specohev
08 09 10 11 12 13 14 15 16 17 impact I. 40
74 76 79 82 86 87 90 93 96 98 01 00 07 09 12 15 16 20 23
Sans Oran* Sint Sonny LLIt Mn Ono M wnolSalenanonwocoun elle I Sown dawn Mt. akianben Finn LLP
[-Figure 5: r• suggesting more EURUSD upside I Figure 6! Big European overweight in unhedged S bonds
1
0.5
0
-0.5
-1.5
-2
-2.5
.3 EMI/SD (the) 1.8
1.6
1.4
1.2
0.8
0.6
0.4 20 European-based ETFs ,
is AuM bn
Is
14
12 f-donominated
10 sovereign bonds
B
6
4
2 S.-denominated bonds
0.2 0
80 84 88 92 96 00 04 08 12 16 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17 bond yield turns
negative
San Coarsen Bs* anon Woo 0 a+ Nobem anon MUMS vat.
Deutsche Bank AG/London It.,ECB cuts to
negative
San Donn@ ark INoceneg Mtn W. Fn.no On Man W arra pones: USD Donn
nun US sonny; ocean end CM j
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