3 M’s that Move the Currency Market

Boris SchlossbergDirector of Currency Research

• GFT refers to Global Futures & Forex, Ltd. and all of its divisions, branches and subsidiaries, including Global Forex Trading, GFT Global Markets Asia Pte. Ltd. and GFT Global Markets UK Limited. In the United Kingdom, GFT Global Markets UK Limited is authorized and regulated by the United Kingdom Financial Services Authority. Each investment product is offered only to and from jurisdictions where solicitation and sale are lawful. Trading of foreign exchange contracts, contracts for differences, derivatives and other investment products which are leveraged, can carry a high level of risk, and may not be suitable for all investors. It is possible to lose more than the initial investment. In Australia, GFT means Global Futures & Forex, Ltd. ARBN 103 508 461, AFS License 226625. A Product Disclosure Statement (PDS) is available at www.gft.com.au. You should read and consider the PDS before making any decision to deal in GFT products. This [advertisement] is published by GFT Global Markets Asia Pte. Ltd. (Company Registration Number 200717665N) in Singapore for informational purposes only and is not an offer or a solicitation to deal in any investment product or to enter into any legal relations, nor an advice or a recommendation with respect to such investment product. © 2009 Global Futures & Forex, Ltd. All rights reserved. CD08BKU.003.021809

• DISCLAIMER: This presentation and the information provided here should not be relied upon as a substitute for extensive independent research before making your investment decisions. Global Forex Trading is merely providing this presentation for your general information. This presentation and its information does not take into account any particular individual’s investment objectives, financial situation, or needs. All investors should obtain advice based on their unique situation before making any investment decision based upon this presentation or any information contained within. In addition, any projections or views of the market provided by the author may not prove to be accurate. Global Forex Trading, Boris Schlossberg, and Kathy Lien will not be responsible for any losses incurred on investments made by readers and clients as a result of any information contained in this presentation. Global Forex Trading, Boris Schlossberg, and Kathy Lien do not render investment, legal, accounting, tax or other professional advice. If such advice is sought, or other expert assistance is required, the services of a competent professional should be sought

Disclaimer

The 3 M’s

Macro

Micro

Monetary Policy

Macro Factors

Macro Political Conflict

Equities and Risk Appetite

Oil and Gold

Risk Appetite

•EUR/JPY vs. DJIA

•Risk On! Risk Off!

Source: DealBook 360

Correlation: SP500 & USD/JPY

Blue Line = USD/JPY

Red Line = SP500

Weekly Chart

Source: GFT Source: DealBook 360

Correlation: SP500 & USD/JPY

Blue Line = USD/JPY

Red Line = SP500

Hourly Chart

Source: DealBook 360

Oil

• Oil vs. USD/CAD

•Inverse correlation

Source: Bloomberg

Geopolitics

• Currency markets avoid political risk

• Sell first, ask questions later

• Capital seeks stability

Source: DealBook 360

Source: DealBook 360

Gold

AUD/USD and Gold: Ignore the divergence at your own risk?

Source: DealBook 360

Micro Factors

Key Micro Data NFP (Labor Data)

ISM (Manufacturing and Services Data)

Inflation

Sentiment

Labor Data

Why is labor so critical to the economy?

• Jobs = Greater Income = Greater Spending = Greater Growth

• In G-3 economies the consumer represents between 60%-70% of GDP

Labor Data – US Unemployment Rate

Source: Bloomberg

Labor Data – EZ Unemployment Rate

Source: Bloomberg

Source: Bloomberg

Labor Data: German Unemployment Rolls

ISM and PMI Surveys Measure Health of Business

> 50 Generally Means Expansion

< 50 Suggests Contraction

ISM/PMI – State of Business

Source: Bloomberg

Production Data – US Manufacturing ISM

Source: Bloomberg

Production Data – US Services ISM

Source: Bloomberg

Production Data – EZ Composite PMI

Inflation is the Key Driver of Interest Rates

All things being equal:

• Hotter inflation generally leads to higher interest rates

• Higher rates generally lead to higher currency

Inflation – The Bane of CB’s

Source: Bloomberg

US Headline CPI

Source: GFT

CPI vs Oil

Source: Bloomberg

EZ Headline CPI

Sentiment Can Create Its Own Reality

Cautionary attitude could lead to retrenchment in spending and ultimately deceleration of growth.

The Power of Sentiment

Source: Bloomberg

US U of Mich

German IFO

Source: Bloomberg

Monetary Policy

Monetary Policy Know The Players

Know The Mandates

Prepare Properly

Ben Bernanke

The Academic

Believes in Transparency

Has Only Presided Over Rate Cuts

Jean Claude Trichet

The Godfather

Price Stability Drives Policy

Too inflexible?

Masaaki Shirakawa

The Conformist

Hemmed in by Stagnant Economy

Rising Yen

Mervyn King

The Gentleman Banker

Caught Between a Rock and a Hard Place

Jean Pierre Roth

The Conservative Swiss

Mark Carney

The Newcomer

Glenn Stevens

The Tough Veteran

Allan Bollard

The Hawk

Macro Trade Example

Macro Trade Dow drops, EUR/JPY follows

Source: DealBook 360

Micro Trade Example

Micro Trade EZ Trade Balance: -6.4B vs. -5.8 forecast

Source: DealBook 360

Monetary Policy Trade Example

Monetary Policy Trade RBA Cuts Rate by 100 bp

Source: DealBook 360

• GFT refers to Global Futures & Forex, Ltd. and all of its divisions, branches and subsidiaries, including Global Forex Trading, GFT Global Markets Asia Pte. Ltd. and GFT Global Markets UK Limited. In the United Kingdom, GFT Global Markets UK Limited is authorized and regulated by the United Kingdom Financial Services Authority. Each investment product is offered only to and from jurisdictions where solicitation and sale are lawful. Trading of foreign exchange contracts, contracts for differences, derivatives and other investment products which are leveraged, can carry a high level of risk, and may not be suitable for all investors. It is possible to lose more than the initial investment. In Australia, GFT means Global Futures & Forex, Ltd. ARBN 103 508 461, AFS License 226625. A Product Disclosure Statement (PDS) is available at www.gft.com.au. You should read and consider the PDS before making any decision to deal in GFT products. This [advertisement] is published by GFT Global Markets Asia Pte. Ltd. (Company Registration Number 200717665N) in Singapore for informational purposes only and is not an offer or a solicitation to deal in any investment product or to enter into any legal relations, nor an advice or a recommendation with respect to such investment product. © 2009 Global Futures & Forex, Ltd. All rights reserved.

• DISCLAIMER: This presentation and the information provided here should not be relied upon as a substitute for extensive independent research before making your investment decisions. Global Forex Trading is merely providing this presentation for your general information. This presentation and its information does not take into account any particular individual’s investment objectives, financial situation, or needs. All investors should obtain advice based on their unique situation before making any investment decision based upon this presentation or any information contained within. In addition, any projections or views of the market provided by the author may not prove to be accurate. Global Forex Trading, Boris Schlossberg, and Kathy Lien will not be responsible for any losses incurred on investments made by readers and clients as a result of any information contained in this presentation. Global Forex Trading, Boris Schlossberg, and Kathy Lien do not render investment, legal, accounting, tax or other professional advice. If such advice is sought, or other expert assistance is required, the services of a competent professional should be sought. CD08BKU.003.021809

Disclaimer