BNP Paribas Top Trades for 2015

15 Top FX Trades for 2015

  1. Short EURUSD – target 1.15
  2. Long USDJPY – target 128
  3. Short EURCAD via 1y Ratio Collar
  4. Long AUDJPY – target 109 spot; buy AUDJPY calls/sell USDJPY calls
  5. Long GBP vs EUR or CHF – EURGBP target 0.72, GBPCHF target 1.73
  6. Trading the UK general election – enter 3m3m FVA GBPUSD
  7. Relative value commodity currency basket (long CAD and MXN vs short
    NOK and AUD)
  8. Buy EURAUD/Sell EURJPY forward vols as a relative value play on
    policy divergence
  9. AUDJPY/EURJPY call switches – buy 3y 110 AUDJPY call/sell 3y 175
    EURJPY call
  10. USDZAR – position for further gradual appreciation via call spread
  11. PLN – stronger then weaker – zero cost put calendar spread
  12. Buy the USD vs the SGD and KRW – USDSGD target 1.35, USDKRW
    target 1150
  13. Long MXN against a basket of JPY, EUR, and AUD – basket target +6.5%
  14. Long BRL against ZAR – target 4.65
  15. Long CLP against EUR – target 700

1. Short EURUSD – target 1.15
The theme of policy divergence that drove EURUSD lower in 2014 should persist
in 2015 as the start of the Fed’s policy tightening in June contrasts with an ongoing
balance sheet expansion by the ECB. We expect real rate differentials to remain a
useful framework for capturing the FX impact of both conventional and
unconventional central bank policies. Specifically, we think that higher US nominal
rates and higher Eurozone inflation expectations will do most of the heavy lifting in
moving the real rate differential against the EUR and in favour of the USD. Our
rates strategists’ forecasts imply a widening of 2y nominal rate differentials by
125bp. If the ECB is successful at pushing eurozone inflation expectations higher,
real rates should move even more (closer to 200bp), suggesting that the risk is for
an even weaker EURUSD than we are currently forecasting.

2. Long USDJPY – target 128
Despite the fact that USDJPY has already rallied substantially, we believe there is
more to come in 2015. The BoJ’s ‘shock and awe’ approach has been effective in
triggering quick JPY sell-offs. However the underlying story of Japanese investor
outflows driven by increasingly negative interest rates at home is only starting to
play out and should drive the yen lower even in the absence of further BoJ policy
action. The risk is that the move becomes too fast for the MoF’s liking, but as we
saw in late 2014, mild jawboning merely slows the USDJPY uptrend.

The post BNP Paribas Top Trades for 2015 appeared first on

Leave a Reply

Your email address will not be published. Required fields are marked *