BNP Paribas STEER. BNP Paribas STEER Summary of deviations

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FX STRATEGY FX QUANT INSIGHT BNP Paribas 31 May 2016 Non-Independent Research Marketing Communication Michael Sneyd +44 (0)20 7595 1307 GBPUSD is overvalued according to, but we question whether the

1 FX STRATEGY FX QUANT INSIGHT BNP Paribas 31 May 2016 Non-Independent Research Marketing Communication Michael Sneyd +44 (0) GBPUSD is overvalued according to, but we question whether the GBP is too high or UK yields are too low. EURUSD appears cheap. is bullish targeting US 10y yields have become a key driver of USDJPY. A 10bp rise corresponds to a 2.7% rise in the for the currency pair. BNP Paribas Summary of deviations Deviation from BNP Paribas, Z-score 3.0 G10 Asia 2.0 CEEMEA LatAm Overvalued Undervalued Source: BNP Paribas The views in this document represent the signals from BNP Paribas suite of models rather than the overall view of FX Strategy team Chart 1: GBPUSD remains overvalued according to 1.38 GBPUSD Chart 2: EURUSD appears cheap. is bullish EURUSD targeting EURUSD Source: BNP Paribas Source: BNP Paribas Non Independent Research - Marketing Communication Please refer to important information at the end of the report

2 BNP Paribas Trading signals and key themes Entry Date Position Entry Rate Target Stop Loss Close Rate Return (%) Existing Open Signals 31-May-16 Short USDPEN May-16 Short USDZAR May-16 Short GBPUSD May-16 Short USDCAD May-16 Short USDMXN May-16 Long EURUSD May-16 Long EURGBP May-16 Short EURSEK Recently Closed Signals 27-May-16 Short USDTHB (30-May-16) May-16 Short USDTHB (26-May-16) May-16 Short USDSGD (24-May-16) May-16 Short USDCAD (24-May-16) Notes: trading signals originally published in Daily update and based on pre-determined trading rules. See here for details. Key Themes 2016 YTD -3.50% GBPUSD expensive or yields too low? The GBP is overvalued versus both the USD and EUR given s of GBPUSD and EURGBP. As we wrote in GBP: Where are we now?, this overvaluation probably reflects a disconnection between the GBP and the UK rates market. Our interest rate strategists highlight that investor positioning in UK rates is low, suggesting that while the GBP is rising on a position squeeze, UK yields may not move in the same direction. Usually we would expect GBPUSD to move back towards its but, in this case, it may be that the rises into line with GBPUSD if UK yields start to increase. USD too rich versus the EUR Following Fed Chair Janet Yellen s hawkish comments last Friday, the decline in EURUSD spot has left the pair undervalued by 1.48 z-scores. remains long EURUSD targeting This year, EURUSD has been the second best performing currency pair based on our trading strategy, returning 4.2% with a hit ratio of 75%. USDJPY trading in line with its what has changed? USDJPY is trading in line with its after trading below it for three months. The relationships captured by indicate that, over this time, the 10y yield spread has become more important for the JPY, while the performance of global equities (our proxy for risk appetite) has become less important. The relationships now suggest that a 10bp rise in the US 10y yield corresponds to a 2.7% rise in the for USDJPY. Chart 3: USDJPY trading back in line with its USDJPY Source: BNP Paribas Source: BNP Paribas Chart 4: USDJPY coefficients 2y Diff Coeff Rate Exp. Diff Coeff MSCI Diff Coeff Oil Coeff MSCI World Coeff May May May May

3 Currency G10 EURUSD GBPUSD USDJPY USDCAD AUDUSD NZDUSD EURGBP EURCHF EURNOK EURSEK Spot z-score (percent) (1.69%) 1.83 (-2.35%) 0.42 (-0.84%) 1.37 (-1.38%) (1.84%) 0.31 (-0.43%) (4.01%) 2.06 (-2.42%) 0.68 (-0.73%) 0.76 (-0.59%) Chart 5: EURUSD (FV=1.1330) EURUSD Chart 7: USDJPY (FV=110.30) USDJPY Chart 9: AUDUSD (FV=0.7390) 0.69 AUDUSD Chart 6: GBPUSD (FV=1.4340) 1.38 GBPUSD Chart 8: USDCAD (FV=1.2860) 1.23 USDCAD Chart 10: NZDUSD (FV=0.6700) 0.62 NZDUSD 31 May

4 Chart 11: EURGBP (FV=0.7900) Chart 12: EURCHF (FV=1.0780) EURGBP Chart 13: EURNOK (FV=9.2320) EURCHF Chart 14: EURSEK (FV=9.2180) EURNOK EURSEK CEEMEA* Currency EURPLN EURCZK EURHUF EURRON USDZAR USDTRY USDILS USDRUB Spot z-score (Percent) (0.23%) (0.03%) 0.23 (-0.16%) 0.71 (-0.28%) 1.50 (-2.44%) (0.11%) 1.60 (-1.63%) 0.50 (-0.74%) Chart 15: EURPLN (FV=4.4050) Chart 16: EURCZK (FV= ) EURPLN EURCZK 31 May

Chart 17: EURHUF (FV=313.50) Chart 18: EURRON (FV=4.4900) 316 4.51 314 312 310 308 306 EURHUF Chart 19: USDZAR (FV=15.4180) 4.49 4.47 4.45 4.43 4.41 EURRON Chart 20: USDTRY (FV=2.9530) 3.02 15.82 15.

5 Chart 17: EURHUF (FV=313.50) Chart 18: EURRON (FV=4.4900) EURHUF Chart 19: USDZAR (FV= ) EURRON Chart 20: USDTRY (FV=2.9530) USDZAR Chart 21: USDILS (FV=3.7760) Mar May-2016 USDTRY Chart 22: USDRUB (FV= ) Mar May-2016 USDILS Asia* USDRUB Currency USDKRW USDMYR USDIDR USDINR USDTHB USDSGD USDPHP USDTWD Spot z-score (percent) 1.36 (-1.78%) 0.92 (-0.61%) 1.82 (-1.84%) 2.12 (-0.89%) 2.15 (-1.23%) 0.78 (-2.23%) 1.14 (-0.66%) 1.24 (-0.68%) 31 May

6 Chart 23: USDKRW (FV=1171) 1130 USDKRW Chart 25: USDIDR (FV=13431) USDIDR Chart 27: USDTHB (FV= ) USDTHB Chart 29: USDPHP (FV= ) USDPHP Chart 24: USDMYR (FV=4.0800) 3.86 USDMYR Chart 26: USDINR (FV= ) USDINR Chart 28: USDSGD (FV=1.3670) 1.31 USDSGD Chart 30: USDTWD (FV= ) USDTWD 31 May

Latam* Currency USDBRL USDCLP USDMXN USDPEN USDCOP 3.6120 688.25 18.1570 3.3040 3029 Spot 3.5700 690.63 18.4560 3.3660 3069 z-score (percent) -1.17 (1.17%) 0.61 (-0.35%) 1.94 (-1.64%) 1.77 (-1.89%) 0.

7 Latam* Currency USDBRL USDCLP USDMXN USDPEN USDCOP Spot z-score (percent) (1.17%) 0.61 (-0.35%) 1.94 (-1.64%) 1.77 (-1.89%) 0.84 (-1.33%) Chart 31: USDBRL (FV=3.6120) Mar Apr May-2016 USDBRL Chart 33: USDMXN (FV= ) USDMXN Chart 35: USDCOP (FV=3029) Chart 32: USDCLP (FV=688.30) USDCLP Chart 34: USDPEN (FV=3.3030) 3.21 USDPEN USDCOP 31 May

8 AUDUSD USDILS USDPEN USDMYR EURSEK USDSGD USDCAD USDJPY USDCLP USDMXN USDCOP EURCHF USDKRW USDTHB EURRON USDPHP USDINR USDIDR GBPUSD EURNOK NZDUSD USDTWD EURHUF EURUSD USDBRL USDRUB USDTRY EURPLN USDZAR EURCZK BNP Paribas Regime Monitor Corridor Stability Cointegration Coefficient Stability Markov Switching High number indicates instability in model Our Regime Monitor tracks four variables to help identify when the driving factors of a currency are changing. Instability in an exchange rate's can lead to a lower performance of our trading strategy. A high score indicates instability in an exchange rate's. A score above 80 indicates the signals have become unstable and should not be traded. Our Regime Monitor is used to help identify when an exchange rate is less likely to revert back towards its. We track four parameters: 1) the stability of the coefficients; 2) the stability of the corridor around ; 3) whether cointegration holds; and 4) whether a regime change can be identified by a Markov Switching model. The Regime Monitor is not used as an automatic filter, but instead is used to support a discretionary decision as to whether to trade a signal from. 31 May

9 FX Global Strategy Contacts Foreign Exchange Steven Saywell Global Head of FX Strategy London Michael Sneyd, CFA FX Strategist & Lead Quant Strategist London James Hellawell Quantitative Strategist London Sam Lynton-Brown FX Strategist London Charlotta Pühringer Graduate London Daniel Katzive, CFA Head of FX Strategy North America New York daniel.katzive@us.bnpparibas.com Vasilis Koutsaftis FX Options Strategist New York vasilis.koutsaftis@americas.bnpparibas.com Emerging Markets FX & IR Strategy Wike Groenenberg Global Head of EM Strategy London wike.groenenberg@uk.bnpparibas.com Piotr Chwiejczak FX & IR CEEMEA Strategist London piotr.chwiejczak@uk.bnpparibas.com Erkin Isik, CFA FX & IR CEEMEA Strategist Istanbul erkin.isik@teb.com.tr Mirza Baig Head of FX & IR Asia Strategy Singapore mirza.s.baig@asia.bnpparibas.com Jennifer Kusuma FX & IR Asia Strategist Singapore jennifer.kusuma@asia.bnpparibas.com Altaz Dagha AU/NZ IR Strategist Singapore altaz.dagha@asia.bnpparibas.com Kun Shan China Strategist Shanghai kun.shan@asia.bnpparibas.com Gabriel Gersztein Head FX & IR Latam Strategy Sao Paulo gabriel.gersztein@br.bnpparibas.com Samuel Castro FX & IR Latam Strategist Sao Paulo samuel.castro@br.bnpparibas.com Gustavo Mendonca FX & IR Latam Strategist Sao Paulo gustavo.mendonca@br.bnpparibas.com Production and Distribution Barbara Consuelo, Foreign Exchange, London. Tel: , Barbara.Consuelo@uk.bnpparibas.com RESEARCH DISCLAIMERS This document has been written by our strategy teams. It does not purport to be an exhaustive analysis, and may be subject to conflicts of interest resulting from their interaction with sales and trading which could affect the objectivity of this report. This document is a marketing communication and is not independent investment research. It has not been prepared in accordance with legal requirements designed to provide the independence of investment research, and is not subject to any prohibition on dealing ahead of the dissemination of investment research. is a trade mark of BNP Paribas The information and opinions contained in this report have been obtained from, or are based on, public sources believed to be reliable, but no representation or warranty, express or implied, is made that such information is accurate, complete or up to date and it should not be relied upon as such. This report does not constitute an offer or solicitation to buy or sell any securities or other investment. Information and opinions contained in the report are published for the assistance of recipients, but are not to be relied upon as authoritative or taken in substitution for the exercise of judgement by any recipient, are subject to change without notice and not intended to provide the sole basis of any evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. To the fullest extent permitted by law, no BNP Paribas group company accepts any liability whatsoever (including in negligence) for any direct or consequential loss arising from any use of or reliance on material contained in this report. All estimates and opinions included in this report are made as of the date of this report. Unless otherwise indicated in this report there is no intention to update this report. 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BNP Paribas may, from time to time, solicit, perform or have performed investment banking, underwriting or other services (including acting as adviser, manager, underwriter or lender) within the last 12 months for any person referred to in this report. BNP Paribas may be a party to an agreement with any person relating to the production of this report. BNP Paribas, may to the extent permitted by law, have acted upon or used the information contained herein, or the research or analysis on which it was based, before its publication. BNP Paribas may receive or intend to seek compensation for investment banking services in the next three months from or in relation to any person mentioned in this report. Any person mentioned in this report may have been provided with sections of this report prior to its publication in order to verify its factual accuracy. This report was produced by a BNP Paribas group company. 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10 limitations. Certain countries within the European Economic Area: This report is solely prepared for professional clients. It is not intended for retail clients and should not be passed on to any such persons. This report has been approved for publication in the United Kingdom by BNP Paribas London Branch. BNP Paribas London Branch: 10 Harewood Avenue, London NW1 6AA; tel: ; fax: Incorporated in France with Limited Liability. Registered Office: 16 boulevard des Italiens, Paris, France RCS Paris. BNP Paribas London Branch is lead supervised by the European Central Bank (ECB) and the Autorité de Contrôle Prudentiel et de Résolution (ACPR). BNP Paribas London Branch is authorised by the ECB, the ACPR and the Prudential Regulation Authority and subject to limited regulation by the Financial Conduct Authority and Prudential Regulation Authority. Details about the extent of our authorisation and regulation by the Prudential Regulation Authority, and regulation by the Financial Conduct Authority are available from us on request. BNP Paribas London Branch is registered in England and Wales under no. FC This report has been approved for publication in France by BNP Paribas SA, BNP Paribas, incorporated in France with Limited Liability (Registered Office: 16 boulevard des Italiens, Paris, France, RCS Paris, is authorized and supervised by European Central Bank (ECB) and by Autorité de Contrôle Prudentiel et de Résolution (ACPR) in respect of supervisions for which the competence remains at national level, in terms of Council Regulation n 1024/2013 of 15 October 2013 conferring specific tasks on the ECB concerning policies relating to the prudential supervision of credit institutions. 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FX Positioning Analysis

FX STRATEGY FX QUANT INSIGHT FX Positioning Analysis 18 April 2016 Non Independent Research Marketing Communication James Hellawell +44 207 595 8485 JPY AUD CAD SEK CHF EUR NOK NZD USD GBP Source: BNP