*INVESTMENT PRODUCTS: NOT A BANK DEPOSIT. NOT GOVERNMENT INSURED. NO BANK GUARANTEE.

MAY LOSE VALUE

Citibank Wealth Management

Aug 24, 2020

with data as of Aug 21, 2020

Weekly FX Strategy FX Analysis Data Forecasts

Weekly FX Insight Please note and carefully read the

Important Disclosure on the last part
0
Please note and carefully read the Important Disclosure on the last part

Weekly FX Strategy: EUR

EUR news Strategy for EUR holders - Diversify into USD
• The market reaction to the July FOMC Minutes suggests a • Risks included second wave risks, US election and the
“hawkish” interpretation. USD rebounded and EUR down. evolution of US/China relations may bring the downside risks
• Euro zone manufacturing PMI comes in at 51.7, which well-below for EUR.
expectation, and Services shows a bigger miss at 50.1 vs 54.5 • Trade wars may blow up again leading to retaliatory CNH
forecast. EUR down.
weakness, which may be one of the negative factors for
EUR outlook EUR.
• Whilst we expect a near term pause, from our cross asset lens we
note that relative short end rate differentials, relative performance
of periphery spreads vs. bunds and higher commodity prices/ Strategy Reference Level Target Level
higher HICP inflation are likely to keep EUR outperformance intact.
Technically, the EUR has now broken out of medium term Bearish on EUR USD 1.1966 1.1696
downtrend and looks set to eventually test 1.20+.
Bearish on EUR HKD 9.28 9.07
S2 S1 R1 R2 0-3m 6-12m LT
forecast forecast forecast
1.1475 1.1630 1.1934 1.2000 1.17 1.22 1.25 Strategy for USD holders - Buy EUR upon retracement
1.1966(Aug high） • Global investors have been tactically underweight European
1.1696(Aug low） assets since early 2018. However, signs are emerging that
this trend is turning. Weekly inflows into Europe-ex-UK
mutual funds and ETFs have picked up recently, which may
favor EUR.
• The rising tensions between China and the US and
investors' attention to the upcoming US presidential election
may increase further downward pressure on USD and
support the EUR.
Source: Bloomberg L.P., as of Aug 21, 2020
Strategy Reference Level Target Level
• EURUSD still needs to convincingly break through 1.1900 – 20
resistance to sustain gains towards the higher levels of 1.24-1.27 Bullish on EUR USD 1.1696 1.1966
but equally, the current consolidation sentiment points to a higher Bullish on EUR HKD 9.07 9.28
floor around the 1.1600 area.
The brackets are the exchange rates in terms of Hong Kong dollar,
with HKD $7.7513 exchange rate for reference 1
Please note and carefully read the Important Disclosure on the last part

Weekly FX Strategy: AUD

AUD news Strategy for AUD holders - Diversify into USD
• The market reaction to the July FOMC Minutes suggests a • Risks included second wave risks, US election and the
“hawkish” interpretation. USD rebounded and AUD down.
evolution of US/China relations may limit AUD’s performance.
• However, the market expected that China and US may hold a call
on the Phase 1 trade deal in the near term, which boosted the • Upside momentum in AUD may fade with the unit also hit by
market sentiment and supported AUD. the rebound in USD post FOMC minutes.
AUD outlook
• Overall, it seems that the RBA remains fairly optimistic and willing Strategy Reference Level Target Level
to see how things evolve with the current level of monetary Bearish on AUD USD 0.7277 0.7063
stimulus. Negative rates pretty much ruled out. Additionally, fiscal
support continues, with the governments JobKeeper and Job Bearish on AUD HKD 5.64 5.47
Seeker programmes recently extended. However, risks to AUD are
fat tailed (second wave risks, US election), with particular worry
placed on the evolution of US/China relations.

S2 S1 R1 R2 0-3m 6-12m LT
forecast forecast forecast
Strategy for USD holders - Buy AUD upon retracement
0.7063 0.7135 0.7277 0.7500 0.72 0.73 0.75
• The rising tensions between China and the US and investors’
attention to the upcoming US presidential election may
increase further downward pressure on USD and support
AUD.
• Citi analysts raised the price forecasts of base metals, such
as copper and aluminum, which may benefit the market
outlook for the commodity currency like AUD.

Strategy Reference Level Target Level

Source: Bloomberg L.P., as of Aug 21, 2020

Bullish on AUD USD 0.7063 0.7277
• The low of AUDUSD so far has been 0.7135 and good support has Bullish on AUD HKD 5.47 5.64
held on the short-term chart with momentum now as oversold as at
the low on 15th June during that short term correction.
The brackets are the exchange rates in terms of Hong Kong dollar,
with HKD $7.7513 exchange rate for reference 2
Please note and carefully read the Important Disclosure on the last part

The brackets are the exchange rates in terms of Hong Kong

Dollar Index dollar, with HKD $7.7513 exchange rate for reference
USD outlook: 0-3M forecast: 93.86 6-12M forecast: 90.87 LT forecast: 88.56
• Fundamentals for the USD are not supportive. Over time, the natural
state of affairs for the $ is lower, based on valuation, negative external
balances and now a Fed willing to supply unlimited cheap USD into
the global monetary system.

• The US economy runs persistent twin deficits. The US fiscal balance is 91.01(2017 low)
set to deteriorate to ~17% of GDP (the largest in DM). What’s also
increasingly likely is that, this time around, much of the deficit may be
88.25(2018 low)
monetized by the Fed (as global debt issuance increases), thus the
USD monetary base may increase, which is negative for the USD.

• Besides, the key to a prolonged lower USD in the medium term may
be relative growth differentials. Currently, European data momentum
(and much of DM) is higher than that of the US.

Source: Bloomberg L.P., as of Aug 21, 2020

Gold/USD
Gold outlook: 0-3M forecast: 2200 6-12M forecast: 2400 LT forecast: --
• We lift gold short-term targets to ~$2,200/oz. 6-12m targets breaching
$2,400/oz seems plausible. The record pace of ETF investor inflows, a
weakening US$ and negative real yields are the primary drivers for the
push higher.

Strategy Reference Level Target Level

Bearish on Gold USD 2100 1900
Bearish on Gold HKD 16,278 14,727

Bullish on Gold USD 1900 2100

Bullish on Gold HKD 14,727 16,278
Source: Bloomberg L.P., as of Aug 21, 2020 3
Please note and carefully read the Important Disclosure on the last part

The brackets are the exchange rates in terms of Hong Kong

USD/RMB dollar, with HKD $7.7513 exchange rate for reference
RMB outlook: 0-3M forecast: 6.95 6-12M forecast: 6.90 LT forecast: 6.50
• We see modest appreciation bias on USDCNY in 2H given China’s
recovery is far advanced and sizeable capital inflows. The volatility of
the RMB exchange rate would also increase on heightened US-China
tensions in 2H.

Strategy Reference Level Target Level

Bearish on RMB USD 6.9050 6.9733
Bearish on RMB HKD 1.1226 1.1116

Bullish on RMB USD 6.9733 6.9050

Bullish on RMB HKD 1.1116 1.1226
Source: Bloomberg L.P., as of Aug 21, 2020

GBP/USD
GBP outlook:
0-3M forecast: 1.30 6-12M forecast: 1.33 LT forecast: 1.42
• The UK government’s fiscal response to the COVID-19 outbreak is already by
far the country’s largest in modern peacetime history. However, in conjunction
with the reluctance of the MPC to currently provide significant additional QE,
the Gilt curve may come under persistent upward pressure over the medium
term. Higher yields caused by increased fiscal risk will likely weigh on the
Pound. Besides, economic data momentum indicators still suggest the UK is
lagging behind many other G10 countries, and it faces some additional
hurdles which could slow it down even more (Brexit uncertainty/ negotiations).
Strategy Reference Level Target Level
Bearish on GBP USD 1.3395 1.2981
Bearish on GBP HKD 10.38 10.06

Bullish on GBP USD 1.2981 1.3395

Bullish on GBP HKD 10.06 10.38 Source: Bloomberg L.P., as of Aug 21, 2020 4
Please note and carefully read the Important Disclosure on the last part

The brackets are the exchange rates in terms of Hong Kong

NZD/USD dollar, with HKD $7.7513 exchange rate for reference
NZD outlook: 0-3M forecast: 0.66 6-12M forecast: 0.65 LT forecast: 0.65
• Amongst the wave of global liquidity, risk asset directionality and the
broad dollar will be an important driver of NZD. However, headwinds to 0.6756(Dec 2019 high)
the global recovery and continued border closures will materially affect
New Zealand. Recent strength is a drag on export earnings and dampens
the outlook for inflation. The RBNZ are very aware of this. Negative rates 0.6377(Jun low)
and/ or increased QE remain non-zero probabilities. This leaves NZD FX
vulnerable to downside.

Strategy Reference Level Target Level

Bearish on NZD USD 0.6756 0.6377
Bearish on NZD HKD 5.24 4.94

Bullish on NZD USD 0.6377 0.6756

Bullish on NZD HKD 4.94 5.24 Source: Bloomberg L.P., as of Aug 21, 2020

USD/CAD
CAD outlook: 0-3M forecast: 1.30 6-12M forecast: 1.27 LT forecast: 1.25
• We expect risk sentiment to be an important driver, but also think CAD has
catching up to do from a fundamental perspective. WTI, and correspondingly
Canada’s ToT, have found a bottom. We forecast a continued rebound here
with WTI at 56$/bbl in 12m (3Q20). Additionally, economic surprises in
Canada continue their positive trajectory. This may continue to support CAD.

Strategy Reference Level Target Level

Bearish on CAD USD 1.2996 1.3459
Bearish on CAD HKD 5.96 5.76

Bullish on CAD USD 1.3459 1.2996

Bullish on CAD HKD 5.76 5.96
Source: Bloomberg L.P., as of Aug 21, 2020 5
Please note and carefully read the Important Disclosure on the last part

The brackets are the exchange rates in terms of Hong Kong

USD/CHF dollar, with HKD $7.7513 exchange rate for reference
CHF outlook: 0-3M forecast: 0.93 6-12M forecast: 0.90 LT forecast: 0.93
• Positive European developments and improving global risk sentiment
will help CHF weaken. Tail risks that could lead to “flight to safety”
inflows to Switzerland include material escalation in COVID-19 cases,
rising geopolitical tensions (e.g. Italy, Brexit), uncertainty near to the
US election, US-China trade war escalations. 0.9216(fibo 0.618)

Strategy Reference Level Target Level 0.8870(fibo 0.50)

Bearish on CHF USD 0.8870 0.9216

Bearish on CHF HKD 8.74 8.41

Bullish on CHF USD 0.9216 0.8870

Bullish on CHF HKD 8.41 8.74
Source: Bloomberg L.P., as of Aug 21, 2020

USD/JPY
JPY outlook: 0-3M forecast: 107 6-12M forecast: 107 LT forecast: 105
• We expect Japanese economic policy to remain in wait-and-see mode
for the foreseeable future. We continue to envisage a more
rangebound USD/JPY path dominated by less demand for JPY longs
as reflation persists but also by the policy responses of government
differing considerably between the US and Japan, keeping the JPY an
underperformer within the G10 complex.

Strategy Reference Level Target Level

Bearish on JPY USD 104.46 107.23
Bearish on JPY HKD 7.42 7.23

Bullish on JPY USD 107.23 104.46

Bullish on JPY HKD 7.23 7.42
Source: Bloomberg L.P., as of Aug 21, 2020 6
Please note and carefully read the Important Disclosure on the last part

Appendix 1: Last week performance, Citi interest rate and FX Forecasts

Citi FX Outlook Forecast Citi FX interest rate Forecast

0-3 month 6-12 month Long-term 8/21/2020 3Q ’20 4Q ’20 1Q ’21 2Q ’21
Dollar Index 93.86 90.87 88.56 *0.00 0.00 0.00 0.00 0.00
EUR/USD 1.17 1.22 1.25 -0.50 -0.50 -0.50 -0.50 -0.50
GBP/USD 1.30 1.33 1.42 0.10 0.10 0.00 0.00 0.00
USD/JPY 107 107 105 -0.10 -0.10 -0.10 -0.10 -0.10
USD/CHF 0.93 0.90 0.93 -0.75 -0.75 -0.75 -0.75 -0.75
AUD/USD 0.72 0.73 0.75 0.25 0.25 0.25 0.25 0.25
NZD/USD 0.66 0.65 0.65 0.25 0.25 0.25 0.25 0.25
USD/CAD 1.30 1.27 1.25 0.25 0.25 0.25 0.25 0.25
USD/CNY 6.95 6.90 6.50 3.05 2.75 2.75 2.75 2.75
Source: Citi (as of Aug 6, 2020) *lower bound Rate cut Rate hike
expectations expectations
Major Currencies Weekly Performance
Year-To-
Last week Weekly 1 month 3 month 52 week
1 month low 3 month low 52 week low Date
close Change high high high
CCY Change
USD 93.25 0.2% 95.12 92.27 99.86 92.27 102.99 92.13 -3.4%
EUR/USD 1.1797 -0.4% 1.1931 1.1527 1.1931 1.0898 1.1966 1.0636 5.3%
USD/JPY 105.80 -0.8% 107.15 104.73 109.59 104.73 112.23 101.19 -2.6%
GBP/USD 1.3090 0.0% 1.3239 1.2731 1.3239 1.2173 1.3514 1.1412 -1.2%
USD/CAD 1.3177 -0.7% 1.3459 1.3168 1.3996 1.3168 1.4668 1.2952 1.4%
AUD/USD 0.7161 -0.1% 0.7243 0.7098 0.7243 0.6537 0.7276 0.5510 2.1%
NZD/USD 0.6541 0.0% 0.6699 0.6535 0.6699 0.6094 0.6756 0.5470 -3.0%
USD/CHF 0.9116 0.3% 0.9332 0.9038 0.9719 0.9038 1.0028 0.9010 -6.0%
USD/CNY 6.9194 -0.4% 7.0184 6.9158 7.1671 6.9158 7.1876 6.8405 -0.6%
USD/CNH 6.9208 -0.3% 7.0176 6.9060 7.1763 6.9060 7.1965 6.8457 -0.7%
GOLD 1940.48 -0.2% 2063.54 1841.91 2063.54 1685.06 2075.47 1445.70 27.6%

Source: Bloomberg L.P., as of Aug 21, 2020 7

Please note and carefully read the Important Disclosure on the last part

Appendix 2: Last week’s Economic Figures

Time Importance Event Period Actual Survey Prior

Monday
08/17/20 07:50 JN !! GDP Annualized SA QoQ 2Q -27.8% -26.9% -2.5%
Tuesday
08/18/20 04:00 US ! Total Net TIC Flows Jun -67.9b -- -$15.9b
08/18/20 09:30 AU !! RBA Minutes of Aug. Policy Meeting Aug
08/18/20 20:30 US !! Building Permits MoM Jul 18.8% 5.40% 3.50%
08/18/20 20:30 US !! Housing Starts MoM Jul 22.6% 5.0% 17.50%
Wednesday
08/19/20 14:00 UK !! CPI YoY Jul 1.0% 0.60% 0.60%
08/19/20 17:00 EC !! CPI YoY Jul 0.40% 0.40% 0.40%
08/19/20 20:30 CA !! CPI YoY Jul 0.10% 0.50% 0.70%
08/19/20 20:30 CA !! CPI Core- Common YoY% Jul 1.30% 1.50% 1.40%
Thursday
08/20/20 02:00 US !!! FOMC Meeting Minutes Jul -- -- --
08/20/20 20:30 US ! Initial Jobless Claims Aug 1106k 920k 971k
08/20/20 22:00 US ! Leading Index Jul 1.4% 1.1% 3.0%
Friday
08/21/20 07:01 UK !! GfK Consumer Confidence Aug -27 -25 -27
08/21/20 07:30 JN !! Natl CPI Ex Fresh Food YoY Jul 0.00% 0.10% 0.00%
08/21/20 14:00 UK !! Retail Sales Ex Auto Fuel YoY Jul 3.10% 1.50% 1.70%
08/21/20 14:00 UK !! Retail Sales Inc Auto Fuel YoY Jul 1.40% 0.10% -1.60%
08/21/20 16:00 EC !! Markit Eurozone Manufacturing PMI Aug 51.7 52.7 51.8
08/21/20 16:00 EC !! Markit Eurozone Services PMI Aug 50.1 54.5 54.7
08/21/20 16:30 UK !! Markit UK PMI Manufacturing SA Aug 55.3 54.0 53.3
08/21/20 16:30 UK !! Markit/CIPS UK Services PMI Aug 60.1 57.0 56.5
08/21/20 20:30 CA !! Retail Sales MoM Jun 23.70% 24.50% 21.20%
08/21/20 20:30 CA !! Retail Sales Ex Auto MoM Jun 15.70% 14.90% 10.60%
08/21/20 22:00 US !! Existing Home Sales MoM Jul 24.70% 14.60% 20.20%

Source: Bloomberg L.P. 8

Please note and carefully read the Important Disclosure on the last part

Appendix 3: Upcoming Economic Figures (Aug 24, 2020 – Aug 28, 2020)

Time Importance Event Period Actual Survey Prior

Monday
08/24/20 06:45 NZ !! Retail Sales Ex Inflation QoQ 2Q -- -- -0.70%
Tuesday
08/25/20 22:00 US !! Conf. Board Consumer Confidence Aug -- 93.2 92.6
08/25/20 22:00 US ! New Home Sales MoM Jul -- -0.10% 13.80%
Wednesday
08/26/20 06:45 NZ !! Exports NZD Jul -- -- 5.07b
08/26/20 06:45 NZ !! Imports NZD Jul -- -- 4.64b
08/26/20 06:45 NZ !! Trade Balance NZD Jul -- -- 426m
08/26/20 20:30 US !! Durable Goods Orders Jul -- 4.00% 7.60%
08/26/20 20:30 US !! Durables Ex Transportation Jul -- 2.50% 3.60%
Thursday
08/27/20 09:30 AU !! Private Capital Expenditure 2Q -- -- -1.60%
08/27/20 20:30 CA !! Current Account Balance 2Q -- -- -$11.10b
08/27/20 20:30 US !!! GDP Annualized QoQ 2Q -- -32.50% -32.90%
08/27/20 20:30 US ! Initial Jobless Claims Aug -- -- --
Friday
08/28/20 06:00 NZ ! ANZ Consumer Confidence MoM Aug -- -- -0.20%
08/28/20 20:30 CA !! GDP YoY Jun -- -- -13.80%
08/28/20 20:30 US !! Personal Income Jul -- -0.10% -1.10%
08/28/20 20:30 US !! Personal Spending Jul -- 1.50% 5.60%
08/28/20 20:30 US !! Advance Goods Trade Balance Jul -- -$71.0b -$70.6b
08/28/20 22:00 US !! U. of Mich. Sentiment Aug -- 72.8 72.8

Source: Bloomberg L.P. 9

Please note and carefully read the Important Disclosure on the last part

Important Disclosure
“Citi analysts” refers to investment professionals within Citi Research (CR) and Citi Global Markets (CGM) and voting
members of the Global Investment Committee of Global Wealth Management.
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11
Please note and carefully read the Important Disclosure on the last part

Important Disclosure
Unrated or non investment grade Debt Securities typically offer a higher yield than investment grade Debt Securities, but
also present greater risks with respect to liquidity, volatility, and non-payment of principal and interest. As a result of being
classified as non investment grade Debt Securities, these Debt Securities present a greater degree of credit risk relative to
many other fixed income Debt Securities.
Higher Credit Risk – Unrated or non investment grade Debt Securities generally have predominantly speculative
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Downgrade Risk – Downgrades in the credit rating of unrated or non investment grade Debt Securities by rating agencies
are generally accompanied by declines in the market value of these Debt Securities. In some circumstances, investors in
the unrated or non investment grade Debt Securities market may anticipate such downgrades as a result of these credits
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Higher Vulnerability to economic cycles - During economic downturns, unrated or non investment grade Debt Securities are
typically more susceptible to price volatility and fall more in value than investment grade Debt Securities as i) investors may
reevaluate holdings in lower-quality bonds in favor of investment-grade corporate Debt Securities; ii) investors become
more risk averse; and iii) default risk rises. This is often referred to a “flight to quality”.
Event Risk – This includes any of a variety of events that can adversely affect the issuer of unrated or non investment
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generally upon the overall economy. It could have a direct or indirect impact on the issuer and their outstanding debts.

12
Please note and carefully read the Important Disclosure on the last part

Important Disclosure
Risk relating to RMB – If you choose RMB as the base currency or the alternate currency, you should also note the
following:

RMB is currently not freely convertible through banks in Hong Kong. Due to exchange controls and/or restrictions imposed
on the convertibility, utilisation or transferability of RMB (if any) which in turn is affected by, amongst other things, the PRC
government's control, there is no guarantee that disruption in the transferability, convertibility or liquidity of RMB will not
occur. There is thus a likelihood that you may not be able to convert RMB received into other freely convertible currencies.

CNH exchange rates and CNY exchange rates are currently quoted in different markets with different exchange rates,
whereby their exchange rate movements may not be in the same direction or magnitude. Therefore, the CNH exchange
rate may be different from the CNY exchange rate.

13