MARKET MOVER - BNP PARIBAS - Investment Services India

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This section is classified as non-objective research evidence suggests that GBP will not weaken in response. We considered establishing a long GBPUSD recommendation simultaneously with our long NZDUSD position prior to the Fed’s announcement last week. We shied away from the GBPUSD idea, because the pair had already rallied sharply in contrast to NZDUSD, which had lagged. Long NZDUSD has performed strongly, however; GBPUSD would have, too. Still, opportunity may have knocked twice, as there are several factors that now suggest GBPUSD may retrace to allow for an attractive entry level. First, our BNP Paribas STEER model suggests that GBPUSD is overvalued on a short-term basis (see chart), signalling that fair value is around 1.60 (vs. spot at 1.62). Second, our BNP Paribas positioning indicator signals that FX investors are still long GBP. However, long GBP positioning has retreated sharply over the past week. The GBP was the most owned currency a week ago, but has fallen to rank sixth. This move suggests that the GBP is approaching a level at which extreme positioning may no longer present a barrier to further appreciation. Our technical analysts note that GBPUSD is trading mid-range within a long-term triangle formation. Short term, GBPUSD has stalled at horizontal resistance around 1.63 and looks very overbought. A correction back to 1.5890 is now very probable (the 38.2% Chart 4: GBPUSD Vulnerable to Near-Term Correction Source: Reuters EcoWin Pro, BNP Paribas correction of the rise to 1.6274). Such a move would still respect the lower bound of the long-term triangle formation, while our overall FX strategy view is that an ultimate breakout will occur to the top side. To benefit from a near-term retracement in GBPUSD, but an ultimate move to the upside, we are initiating a conditional long GBPUSD spot FX recommendation on a pullback to 1.60. We target a move to 1.67 (our end-Q3 forecast), with a stop at 1.5750. FX Strategy / Steven Saywell 20 September 2012 Market Mover 40 www.GlobalMarkets.bnpparibas.com
This section is classified as non-objective research Commodity Market Outlook • We expect a rise in oil prices over the next 18 months. • Base metals prices have moved in a pack in 2012, but are expected to diverge in 2013. • Higher demand and Black Sea trade barriers may lead to a leg up in agriculture. Oil and natural gas Despite the economic headwinds, we expect world oil demand to prove resilient, notably in emerging markets. Tighter sanctions on Iranian oil are likely to be accompanied by greater geopolitical tension and an erosion of spare production capacity in the OPEC countries. In non-OPEC countries, the only oil supply growth will come from the US but it will remain confined to the domestic market, while outages and declines in mature fields will persist elsewhere. The forthcoming global monetary-policy easing should bring about lower volatility, greater risk appetite and, in the case of the Fed, a weaker US dollar. All of this suggests a higher price for oil for the balance of 2012 and into 2013. In the US natural gas markets, the oversupply from shale plays will continue to dominate market direction over the next quarter, but eventually ebb in 2013. We will only see demand-driven price support when winter demand picks up, eroding the overhang in stocks. We expect switches in baseload electricity generation and producer cutbacks to tighten balances progressively, suggesting gas prices will strengthen markedly in the second half of 2013. Metals A strong rally late in the quarter looks set to leave base metal prices down no more than 3-4%, on average, in Q3 2012. Monetary easing, other stimulus measures and tight supply in the flagship copper market are expected to drive further price recovery in Q4. Base metals have mostly moved in a pack this year, but we expect greater divergence in 2013. Copper prices may come under downward pressure due to faster supply growth, but the fundamentals of other metals should improve. We expect monetary accommodation to support gold and silver in Q4 2012. Higher liquidity and inflation expectations, plus a depreciating USD, should be positive factors. Officialsector purchases and a rebound in Chinese demand should more than offset shrinking Indian jewellery demand. Platinum and palladium, too, should benefit from higher liquidity and risk appetite, while South African supply disruptions will erode market surpluses. Agriculture Grains and oilseeds prices surged by more than 50% this summer, as July was the hottest month on record in 48 US states. As a result, the US 2012-13 corn yield may be at least 22% below its historical trend dating back to 1965, while the soybean yield may be cut further in Q4. Feed demand destruction, a stronger US dollar than last year and seasonal pressure linked to crop harvests across the northern hemisphere may offset part of US field losses short term and push prices down slightly by November. But, tight global stocks-to-use ratios, reviving biofuel demand and trade barriers in the Black Sea region may trigger a new leg up in agriculture this winter. Table 1: BNP Paribas commodity price forecasts, period averages Issue date 2012 (f) 2013 (f) Q4 2012 (f) Q1 2013 (f) Q2 2013 (f) Q3 2013 (f) Q4 2013 (f) NYMEX WTI 1m (USD/bbl) 07/09/2012 98 112 104 116 110 108 112 ICE Brent 1m (USD/bbl) 07/09/2012 113 120 117 125 118 116 120 NYMEX Henry Hub (USD/MBTU) 18/07/2012 2.70 4.00 3.05 3.60 3.65 4.15 4.65 Aluminium cash (USD/t) 11/09/2012 2,055 2,350 2,145 2,250 2,325 2,375 2,450 Copper cash (USD/t) 11/09/2012 8,100 8,000 8,500 8,525 8,225 7,825 7,425 Nickel cash (USD/t) 11/09/2012 17,600 18,375 17,425 18,000 18,500 18,250 18,750 Zinc cash (USD/t) 11/09/2012 1,980 2,325 2,080 2,175 2,250 2,350 2,525 Lead cash (USD/t) 11/09/2012 2,065 2,550 2,235 2,375 2,475 2,600 2,750 Tin cash (USD/t) 11/09/2012 21,200 25,500 22,000 24,000 25,500 26,000 26,500 Gold spot (USD/oz) 14/09/2012 1,685 1,900 1,795 1,865 1,900 1,925 1,915 Silver spot (USD/oz) 14/09/2012 32.75 41.45 39.15 42.60 43.00 41.85 38.35 Platinum spot (USD/oz) 14/09/2012 1,575 1,820 1,705 1,785 1,815 1,835 1,840 Palladium spot (USD/oz) 14/09/2012 665 900 725 800 860 925 1,010 Corn (USD¢/bu) 12/09/2012 708 854 790 855 930 845 785 Cotton (USD¢/lb) 12/09/2012 83 105 80 95 120 115 90 Soybeans (USD¢/bu) 12/09/2012 1526 1793 1720 1900 1830 1730 1710 Wheat (USD¢/bu) 12/09/2012 750 905 855 925 995 870 820 Live cattle (USD¢/lb) 22/11/2011 122 140 128 135 140 140 145 Sugar (USD¢/lb) 12/09/2012 22 26 22 25 28 27 25 Source: BNP Paribas (f) Forecast Commodity Markets Strategy 20 September 2012 Market Mover 41 www.GlobalMarkets.bnpparibas.com
Page 1 and 2: Market Economics | Interest Rate St
Page 3 and 4: Spain set to present its new budget
Page 5 and 6: The methodology All of the above in
Page 7 and 8: Ireland: What to Expect When You Ar
Page 9 and 10: Spain: Inching Closer to a Request
Page 11 and 12: UK Inflation: No Pressure • UK in
Page 13 and 14: US Housing: New Channels for Policy
Page 15 and 16: Japan: The Eastern Fiscal Cliff •
Page 17 and 18: an agreement that all budget-relate
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Page 33 and 34: Table 1: BNP Paribas' Inflation For
Page 35 and 36: Table 3: BNP Paribas' Inflation For
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Page 43 and 44: Economic Calendar: 21 - 28 Sep (con
Page 45 and 46: Key Data Preview Chart 1: UK Cumula
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Page 49 and 50: Key Data Preview Chart 9: German ES
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Page 53 and 54: Key Data Preview 7000 6500 6000 550
Page 55 and 56: Treasury and SAS Issuance Calendar
Page 57 and 58: Central Bank Watch Interest Rate EU
Page 61: For Production and Distribution, pl

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