From: Vahe Stepanian To: [email protected] Cc: Nay Gupta Paul Morris Vinit Sahni < Subject: Fw: Position for EURUSD lower ahead of ECB via vanilla nut or collar [C] Date: Tue, 03 Jun 2014 14:47:07 +0000 Inline-Images: unnamed; unnamed(1); unnamed(2); unnamed(3); unnamed(4); unnamed(5) Classification: Confidential Good Morning Jeffrey - please see below per Nav's request. To summarize, two EURUSD trade ideas: Trade 1: Buy a 1-month European style 0.22% OTMspot EURUSD put, offered at 0.67% of EUR notional Trade 2: Buy a 3-month European style 1.03% OTMspot EURUSD put, funded by selling a 3-month European style 0.81% OTMspot EURUSD call, offered at zero premium Thank you, Vahe Forwarded by Apurva Guplaidbidbcom on 06/03/2014 03:14 PM ---- • ECB members have been increasingly vocal about the link between EUR currency strength and low inflation, and the need for a lower EURUSD • Today's lower-than-expected Eurozone CPI print is further reason for ECB to loosen monetary policy, given that ECB Governing Council already shares a consensus view on negative deposit rate and unsterilized SMP • EUR rates have room to fall further, while USD rates should rise as economy recovers, weighing on EURUSD - Forward EONIA out of the June ECB meeting is 12bp (11bp below the current fix), and that out of the July ECB meeting is 9bp - Full liquidity measures (like LTRO, lowering reserve requirements or QE) could see EONIA drop to around zero • Inflows into European assets, which have supported EURUSD past year, have been slowing down lately which would also weigh on EUR strength - Net purchases of European assets by US investors fell to zero in Q1-2014, while Japanese investors were net sellers (Q1-14 being the first negative quarter in 2 years) Trades I like best to play EURUSD lower: Trade 1: Buy a 1-month European style 0.22% OTMspot EURUSD put offered at 0.67% of EUR notional Ref spot: 1.3610 Put strike: 1.3580 (0.22% OTMspot) Breakeven: 1.3489 1m