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Deutsche Bank
Markets Research
Global

Foreign Exchange
FX Spot

Date
13 January 2014

FX Daily
FX implications of lower oil prices



If DB’s forecast of lower oil prices materializes, this will provide further
support for our stronger USD view. The Fed has tightened policy the
year after the last 4 favorable ‘exogenous’ oil shocks.
Historic
precedent fits with current circumstances where lower oil prices help
risky assets and the real economic recovery, such that initial Fed
accommodation gives way to Fed tightening and a broadening of USD
strength.

DB is forecasting a decline in WTI to $85/barrel by the end of Q2 2014, which
is one hint that asset and FX specific implications of a favorable oil supply
shock warrant consideration.
Table 1: Real economy and financial indicators in key years (in blue) when oil prices fell sharply
1983

1984

1985

1986

1987

1992

1993

1994

1996

1997

1998

1999

Average
1983-2012

29.6
-7.1

26.4
-10.8

26.3
-0.4

17.9
-31.8

16.7
-6.6

19.5
1.8

14.2
-27.2

17.8
25.3

25.3
30.3

17.6
-30.4

11.8
-33.1

25.7
118.2

37.7
9.2

4.6
2.7
3.8
4.7
9.8

7.3
4.8
4.0
4.9
7.8

4.2
3.8
3.8
4.3
8.0

3.5
2.9
1.2
3.8
8.3

3.5
3.4
4.3
4.2
10.5

3.6
2.1
3.0
3.4
5.3

2.7
1.4
2.8
3.1
4.9

4.0
3.0
2.6
2.6
5.2

3.8
2.9
3.4
2.6
4.9

4.5
3.7
1.7
2.3
4.8

4.5
2.7
1.6
2.5
4.2

4.8
3.4
2.7
1.9
3.6

3.0
2.5
2.9
2.9
4.6

11.8
13.5
-1.3
-14.5
JPY
EUR

14.9
16.4
8.6
-14.3
USD
NZD

-18.5
-0.2
-20.4
25.3
EUR
AUD

-16.1
-4.0
-21.4
20.9
CHF
AUD

-17.5
-6.1
-23.2
22.2
JPY
USD

10.6
9.1
0.0
-9.9
USD
SEK

4.9
8.2
-10.4
-7.6
JPY
SEK

-8.4
5.2
-10.8
10.2
NZD
CAD

4.0
3.5
12.1
-1.9
GBP
CHF

13.0
13.5
12.7
-12.3
USD
AUD

-5.5
1.8
-13.3
6.7
JPY
NZD

8.2
1.0
-9.7
-14.1
JPY
EUR

-0.8
2.6
-2.6
1.7
N/A
N/A

Fed funds target rate
8.0
Fed funds target rate change in bps
0
10 yr yield
11.8
10 yr yield change in bps
146
BAA-10 yr yield spread
1.9
BAA-10 yr yield spread change in bp -185.0
Equities
S&P 500 YoY % change
17.3
MSCI World Index YoY % change
18.6
Commodities
CRB Industrials Index YoY % change -0.4
Gold Spot YoY % change
-16.5

8.1
13
11.6
-27
1.9
-8.0

7.8
-38
9.0
-255
2.6
73.0

6.0
-175
7.2
-177
2.7
16.0

6.8
81
8.8
160
2.5
-28.4

3.0
-100
6.7
-1
2.1
-44.1

3.0
0
5.8
-90
1.9
-22.2

5.5
250
7.8
203
1.3
-62.0

5.3
-25
6.4
84
1.5
-44.3

5.5
25
5.7
-69
1.6
11.8

4.8
-75
4.6
-108
2.6
99.2

5.5
75
6.4
179
1.7
-83.4

4.3
-26
5.9
-29
2.4
-3.0

1.4
1.8

26.3
37.0

14.6
39.1

2.0
14.3

4.5
-7.1

7.1
20.4

-1.5
3.4

20.3
11.7

31.0
14.2

26.7
22.8

19.5
23.6

9.4
9.2

-12.9
-19.2

-2.4
6.1

-0.6
19.5

20.0
23.8

4.2
-5.4

11.2
17.4

10.0
-2.3

2.1
-4.6

-22.2
-21.7

-12.1
-0.3

4.1
0.0

5.2
5.5

(Values as of end of period)
Oil
Oil Spot
Oil Spot YoY % change
Real Economy Indicators
US Real GDP YoY % change
OECD Real GDP YoY % change
US CPI YoY % change
US Core CPI YoY % change
OECD Core CPI YoY % change
Financial Indicators
Currencies

DXY Index YoY % change
USD TWI broad YoY % change
USD/JPY YoY % change
EUR/USD YoY % change
Strongest G10 currency
Weakest G10 currency
Interest rates

Source: Deutsche Bank, EcoWin, Bloomberg LP

________________________________________________________________________________________________________________
Deutsche Bank Securities Inc.