International Financial Outlook - April 2018 - Bank of Scotland Business

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International Financial Outlook - April 2018 - Bank of Scotland Business
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International
Financial Outlook
April 2018
Contents

Overview                                                          2
Fundamental Views – G10 FX                                        3
Fundamental Views – Other Developed Markets FX                    5
Developed Market FX Forecasts                                     6
BRIC FX                                                           7
Key EM Currency Forecasts                                         8
Interest Rates - UK                                               9
Interest Rates – US & Euro                                      10
Inflation                                                       11

Key Economic and Political Events Calendar                      12

All historical data sourced from Bloomberg
All forecasts sourced from Bank of Scotland (BoS)
Data sourced 10th April 2017

This document should be regarded as a marketing communication, it is
not intended to be investment research and has not been prepared in
accordance with legal requirements to promote the independence of
investment research and should not necessarily be considered
objective or unbiased.

                                                       Marketing Communication | 1
Overview
Financial market review – past month                                  this year to 2.25%. It signalled three hikes in 2019, compared
                                                                      with two previously. Economic growth forecasts were revised
The escalation of global trade tensions has led to further            higher following the tax cuts. Fed Chairman Jerome Powell
tightening of financial conditions. The initial announcement of       was reticent about the impact of the current trade dispute
US steel and aluminium tariffs, with notable exemptions for           with China, but the tightness of the labour market remained a
some countries, was met with China’s retaliatory tariffs of $3bn      key focal point for policymakers. Employment growth slowed
on US imports. Further proposed import tariffs on around              to 103k in March, but it followed a very strong outturn of 326k
$50bn of some 1,300 Chinese products led to proposed                  in February, while the unemployment rate remained at the
countermeasures by China of a similar value, including on             cyclical low of 4.1%. Wage growth, however, nudged up to
politically sensitive products such as agriculture and aircraft. At   only 2.7% from 2.6%.
the time of writing, President Trump responded by instructing
officials to look into potential tariffs on a further $100bn of       Following the strongest economic growth in the Eurozone last
Chinese goods.                                                        year for a decade, there have been downside surprises in the
                                                                      data recently. The manufacturing PMI fell to 56.6 in March,
Thus far, the proposed tariff increases seem most likely to be        having peaked at 60.6 in December, while the services index
part of a negotiating tactic to wring concessions from China.         declined to 54.9 from the January high of 58.0. These levels,
The key uncertainty, however, is how much further the dispute         however, are still consistent with above trend economic
will intensify before both sides step back from the brink. A          growth, although the risk is that the pace may have
downward spiral of ‘tit-for-tat’ measures has the potential to        moderated in Q1. Headline CPI inflation increased to 1.4% in
reduce global economic growth, while also raising inflation.          March from 1.1% in February, but underlying price pressures
Increased economic uncertainty in the meantime could also             remain subdued. ‘Core’ CPI inflation, which excludes food and
weigh on confidence and activity.                                     energy, was unchanged at 1.0% in March.
Global equity markets remained under pressure, with the MSCI
world index declining nearly 5% over the past month. Longer-          Summary of key forecasts
dated bond yields fell in the US, UK and Germany, leading to a
flattening of yield curves, while corporate bond spreads               We maintain our forecast for UK interest rates to rise by a
widened. The US 10 year Treasury yield declined below 2.8%,             quarter point to 0.75% in May, with a further increase to
while the UK 10-year gilt yield dipped below 1.4% and the               1% in November. Activity in some sectors may have been
German 10-year bund yield fell back to 0.5%.                            affected by the unusually cold weather, but underlying
                                                                        economic sentiment has held up. Headline CPI inflation is
Even as trade tensions with China have risen, hopes for a deal
                                                                        likely to have peaked, but the path back to the 2% target is
in NAFTA negotiations has lifted the Canadian dollar and
                                                                        forecast to be gradual given some signs that domestic
Mexican peso. The British pound, meanwhile, has been
supported by greater optimism of an eventual Brexit deal                price pressures are emerging.
after the agreement on a transitional period. The euro, in             The US Federal Reserve raised interest rates for a sixth
contrast, has underperformed following negative data                    time at its March meeting to 1.75% and maintained its
surprises, which have left markets pondering whether the                expectation of gradual hikes. We expect the next rise in
duration of ECB asset purchases might be extended and, with             June and a further hike in the second half.
it, a potential delay in the first interest rate rise.
                                                                        Notwithstanding uncertainties related to the potential rise
The pound has also been supported by expectations that the              in global protectionism, strong economic growth boosted
Bank of England will raise interest rates at its May meeting,           by tax cuts and a tight labour market will increase
which would be the second increase in six months. At the                confidence that domestic inflation will continue to build.
March meeting, two of the nine MPC members dissented
                                                                       Our view of the ECB remains that it will continue with
from the majority and voted for an immediate rate rise. UK CPI
                                                                        monthly asset purchases of €30bn until September and
inflation remains above target, despite falling by more than
expected to 2.7% in February from 3.0% in January. The                  wind down the programme by the end of the year. That
fading impact of higher import prices is expected to be partly          would pave the way for interest rates to be raised in the
offset by emerging domestic inflation pressures, with wage              middle of 2019. Recent downside data surprises have
growth showing signs of strengthening and with only a                   increased the risk that policy stimulus will continue for
tentative pickup in recent productivity growth. Moreover, the           longer, although some of the softness may prove to be
potential negative impact of the poor weather on economic               temporary.
activity, as suggested by the March PMI surveys for
                                                                       UK and US 10-year bond yields are forecast to rise to 1.8%
construction and services, is expected to be temporary.
Indeed, the GfK consumer confidence index unexpectedly                  and 3.0%, respectively, by end-2018, and to 2.1% and
rose to 7 in March from 10 in February, while the Lloyds                3.2% by end-2019. In FX, we anticipate GBP/USD to stay in
Business Barometer showed only a marginal fall in overall               a broad range, with an end-year target of 1.38, rising to
business sentiment to 32 from 33.                                       1.42 by end-2019. Our central view is for the euro to
                                                                        outperform, with the end-2018 forecast for EUR/USD at
In the US, the Federal Reserve raised interest rates by a               1.25, rising to 1.30 by end-2019, and EUR/GBP at 0.91
quarter point to 1.75%, as expected, at its March meeting. The
                                                                        (GBP/EUR at 1.10), rising to 0.92 (GBP/EUR at 1.09) by
‘dot plot’ of individual policymakers’ projections leaned closer
                                                                        end-2019.
to four rate rises this year, but overall maintained three hikes

2 | Marketing Communication
Fundamental Views – G10 FX

                                                   EUR/USD
EUR/USD
                                                   The euro has remained in a narrow range below 1.25. After recording
1.30
                                                   the strongest growth in 2017 for a decade, survey and ‘hard’ data
                                                   suggest a potential softening of Eurozone economic growth in Q1. The
                                                   US economy and labour market remain strong. The slowdown in
1.25                                               employment growth to 103k in March followed a very strong outturn in
                                                   February, while unemployment remained at the cyclical low of 4.1%. The
                                                   upward trajectory in US wage growth, however, remains moderate,
                                                   which may be evidence of some slack in the labour market. We therefore
1.20                                               expect the Fed to continue to tighten policy at a gradual pace, with two
                                                   further hikes to 2.25% this year. The impact of a global trade war is
                                                   difficult to predict. The dollar may benefit if there is comparatively less
1.15
                                                   harm to the US economy, but it could also raise the risk premium on US
                                Actual             assets. The ECB, meanwhile, still expects economic growth to remain
                                Forw ard Implied   strong, despite recent signs of a soft patch. The greater risk may be the
                                BoS Forecast       outlook for underlying inflation in the Eurozone, which remains
1.10                                               stubbornly low. Nevertheless, the central view is that ECB will proceed
   Jun 17   Dec 17   Jun 18   Dec 18      Jun 19   with policy normalisation, culminating in the first interest rate rise in mid-
                                                   2019. Our EUR/USD target is 1.25 at end-2018 and 1.30 at end-2019.

GBP/USD                                            GBP/USD
1.45                                               The pound’s post-referendum high in January was more a reflection of
                                                   dollar weakness, but its more recent rises may be a result of lower implied
                                                   Brexit risk premium and a more hawkish UK policy outlook. The agreement
                                                   on a transition period has raised optimism in the markets of an orderly
1.40
                                                   Brexit deal. UK economic activity has been broadly resilient, despite
                                                   potential temporary effects of the snow. Headline CPI inflation is likely to
                                                   have peaked, although fading import price inflation is expected to be offset
1.35                                               by emerging domestic price pressures. Overall, we anticipate two UK rate
                                                   rises this year, in May and November. In the US, employment growth
                                                   slowed to 103k in March, but the monthly average in Q1 was still above that
                                                   for 2017. Given limited rises in wage growth, we expect Fed policy
1.30                                               tightening to proceed at a gradual pace, with two further hikes to 2.25%
                                Actual             this year. The economic impact of a potential global trade dispute is
                                Forw ard Implied   uncertain – it might improve relative US performance, but it could also raise
                                BoS Forecast
                                                   the risk premium on US assets. Brexit negotiations, meanwhile, could limit
1.25
   Jun 17   Dec 17   Jun 18   Dec 18      Jun 19   near-term sterling strength. Overall, we project 1.38 at end-2018 and to
                                                   1.42 at end-2019.

                                                   GBP/EUR
GBP/EUR                                            Sterling has risen to 1.15 at the top end of a narrow range that has
1.18                            Actual             persisted since September. Optimism in the financial markets of an
                                Forw ard Implied   orderly Brexit deal has risen, following the agreement on a transitional
                                BoS Forecast       period, while the UK policy outlook has turned more hawkish. The
1.16
                                                   unusually cold weather may have temporarily dented economic activity
                                                   in the UK and Eurozone, although negative data surprises this year have
1.14                                               been more striking in the latter. UK headline CPI inflation, having fallen
                                                   to 2.7% in February, is likely to have peaked, but the projected decline
1.12                                               back to the 2% target is gradual, given emerging domestic price
                                                   pressures. Eurozone underlying price pressures, meanwhile, remain
                                                   subdued. The ‘core’ measure, excluding food and energy, stayed at
1.10
                                                   only 1.0% in March. Overall, we anticipate two UK rate rises this year, in
                                                   May and November, although Brexit negotiations may limit near-term
1.08                                               upside for the pound. In the Eurozone, we still expect the ECB to wind
                                                   down the asset purchase programme by the end of this year, paving
1.06                                               the way for a rise in interest rates from mid-2019. We forecast GBP/EUR
   Jun 17   Dec 17   Jun 18   Dec 18      Jun 19   to fall to 1.10 at end-2018 and to 1.09 at end 2019.

                                                                                           Marketing Communication |           3
Fundamental Views – G10 FX

USD/JPY
                                                          USD/JPY
                                  Actual
120                                                       Until late March, the US dollar had been under pressure against the Japanese
                                  Forw ard Implied
                                  BoS Forecast            yen. The deterioration in sentiment – due to concerns over trade and spikes in
                                                          equity market volatility ¬– combined with speculation that the Bank of Japan
                                                          (BoJ) could remove its easing bias sooner than expected were triggers for
115
                                                          JPY strength. At its latest meeting the BoJ left its policy framework
                                                          unchanged, with Governor Kuroda once again reiterating his commitment to
                                                          ultra-loose monetary policy. The central bank’s efforts to reverse the low
110                                                       inflation environment do appear to be having an effect. The Japanese output
                                                          gap recently rose to its highest level in over a decade and Q4 GDP growth
                                                          surged to 1.6% (annualised). This, however, is yet to translate into upward
105                                                       price pressures, with ‘core’ inflation for February measuring just 0.5%. For this
                                                          reason we believe the BoJ will continue to maintain its accommodative
                                                          stance. Given this, the 2-year US-Japan interest rate differential could widen.
                                                          Moreover, the reduction in short JPY positioning may enable USD/JPY to
100
  Jun 17      Dec 17   Jun 18     Dec 18      Jun 19      move higher more freely. All considered, we see a strong case for the
                                                          currency pair to reach 112 by the middle of the year.

                                                          AUD/USD
AUD/USD                                                   Having made a new multi-year high against the US dollar in late January,
0.82
                                                          the Australian dollar softened through the rest of the quarter, falling
                                                          towards 0.76. Growing tension between the US and China over trade and a
                                                          sustained fall in commodity prices were key factors that pressured
0.80                                                      AUD/USD. Australia finds itself in a difficult position in the trade dispute
                                                          given that China is its most significant trading partner, yet the US is its
                                                          largest foreign investor. At April’s policy meeting, the Reserve Bank of
                                                          Australia (RBA) left interest rates unchanged at 1.50%. Governor Lowe
0.78
                                                          showed some concern over the “direction of international trade policy” and
                                                          the “outlook for household consumption”. His tone was relatively dovish.
                                                          Unsurprisingly against this backdrop, the 2-year Australian-US government
0.76
                                                          bond yield differential fell close to its lowest level in almost two decades.
                                    Actual
                                    Forw ard Implied
                                                          Yet, with the RBA still forecasting relatively robust GDP growth for 2018 and
                                    BoS Forecast          the market not expecting a single interest rate rise this year, the risks to
0.74                                                      Australian rates are, we believe, now skewed to the upside. Assuming trade
   Jun 17     Dec 17   Jun 18     Dec 18      Jun 19      tensions subside and global growth remains relatively firm, we expect
                                                          AUD/USD to remain range bound, and forecast 0.78 for year-end.

                                                          USD/CAD
USD/CAD
                                    Actual
                                                          The US dollar has fallen sharply from its mid-March high above 1.31 against
1.32                                                      the Canadian dollar. Mixed US employment reports over the past two
                                    Forw ard Implied
                                    BoS Forecast          months and escalating trade tensions between the US and China have
                                                          buffeted the USD. At the same time, rising oil prices and the prospect of an
                                                          agreement on NAFTA have buoyed the CAD. We expect the decline in
1.28                                                      USD/CAD to continue. The 2-year US-Canada interest rate differential is
                                                          near its recent high and, based on current market pricing, the risks to
                                                          Canada’s interest rate policy appear to be asymmetric. The alleviation of
                                                          uncertainty that would accompany an ‘initial’ NAFTA deal could be a trigger
                                                          for the Bank of Canada to adopt a more hawkish stance. This would likely
1.24
                                                          drive a narrowing in the rate differential and further pressure USD/CAD.
                                                          The unexpectedly sharp rise in Canada’s inflation rate in February, from
                                                          1.7%y/y to 2.2%y/y, adds to the argument for tighter-than-expected
                                                          monetary policy. Moreover, with the market ‘net short’ of Canadian dollars
1.20                                                      and ‘fair value’ estimated at 1.20, we think there are good reasons to be
   Jun 17     Dec 17   Jun 18     Dec 18         Jun 19
                                                          bearish on USD/CAD. We expect the pair to fall towards 1.20 by end-2019.

4   |   Marketing Communication
Fundamental Views – Other Developed Market FX

                                                   NZD/USD
NZD/USD                         Actual             The New Zealand dollar continues to trade in a relatively narrow range against the
                                Forw ard Implied   US dollar. While increased tension between the US and China on trade has
                                BoS Forecast
0.76                                               weighed on risk sentiment, the NZD has been supported by milk prices stabilising
                                                   near their recent highs close to $3,300 per tonne. From a fundamental perspective,
0.72
                                                   little has changed over the past month. The outlook for NZD/USD is likely to remain
                                                   responsive to the respective policy stances of the RBNZ and Federal Reserve. The
                                                   former left benchmark interest rates unchanged, at 1.75%, at its last meeting.
0.68                                               Inflation and inflation expectations are still subdued. Therefore, the central bank is
                                                   under no pressure to tighten. Having raised interest rates in March, the latter
0.64                                               continues to suggest two further rate rises are likely this year. We agree with this
   Jun 17    Dec 17   Jun 18    Dec 18    Jun 19   assessment. The knock-on impact of diverging central bank policy rates on NZ-US
                                                   interest rate differentials should lead NZD/USD lower. We see mild downside risks
                                                   to the pair through the coming quarters, forecasting 0.71 at end-2018.

                                                   EUR/CHF
EUR/CHF                                            Given its safe-haven status, one might have thought that the Swiss franc would have
1.25                                               been among the most responsive currencies to the growing tensions between the US
                                                   and China and equity market sell-off. This, however, has not been the case. In fact,
1.20                                               from its February high against the euro, the franc has experienced a near 3%
                                                   depreciation, leaving EUR/CHF close to its multi-year highs. Fundamentally, Swiss
1.15                                               economic data remain relatively firm. Q4 GDP growth rose to 1.9%y/y, while the
                                                   unemployment rate has fallen below 3% for the first time since mid-2014. In spite of
1.10                           Actual              this, inflation, while on an upward trajectory, only rose by 0.8%y/y in February. As
                               Forw ard Implied    such, the Swiss National Bank is unlikely to change its bias towards loose monetary
                               BoS Forecast
1.05                                               conditions. Governor Jordan indicated just that, suggesting it will be a “relatively long
   Jun 17    Dec 17   Jun 18    Dec 18    Jun 19   time” before the central bank has to adjust policy. In contrast, the ECB removed its
                                                   easing bias at its latest policy meeting. Given the prevailing market and monetary
                                                   policy trends, we favour EUR/CHF to extend its rally, towards 1.21 by end-2019.

                                                   EUR/NOK
EUR/NOK                        Actual
                               Forw ard Implied    Following a brief spike to 9.88 in early February, the Norwegian krone has rallied to 9.60
                               BoS Forecast        against the euro, but EUR/NOK remains confined to its medium-term range. The krone
10.00
                                                   has been supported by the stability of Brent Crude prices and more ‘hawkish’ guidance
                                                   from the Norwegian central bank. At its March meeting, the Norges bank left the deposit
 9.60                                              rate at 0.50%. While this was largely expected, the market was caught off-guard by
                                                   comments from Governor Olsen, who suggested that policy rates were likely to be
 9.20
                                                   increased “after summer.” This was much sooner than the market had previously
                                                   anticipated. Yet, mixed economic data may leave such an outlook open to debate. It is
                                                   true that inflation has risen since sharply since the turn of the year, and is now above target.
 8.80                                              However, retail sales unexpectedly fell in February, while confidence in the manufacturing
    Jun 17   Dec 17   Jun 18    Dec 18    Jun 19
                                                   sector has also recently declined. Overall, with the krone fundamentally “undervalued”
                                                   based on model estimates, we favour EUR/NOK to decline towards 9.30 by end-2018.

                                                   EUR/SEK
EUR/SEK                                            The Swedish krona continues to lose ground against the euro, with EUR/SEK
10.40
                                                   recently rising to its highest level since January 2010, touching 10.35. In Sweden,
                                                   consumer and business activity appear to be under pressure. Retail sales remain
10.10
                                                   subdued and key confidence surveys have pulled back from their multi-year highs.
                                                   At the same time, euro area data have also started to turn lower. Forward-looking
 9.80
                                                   indicators, including the PMI surveys, have raised questions over the sustainability of
                                                   the bloc’s growth rate. Clearly, any deterioration in European growth will negatively
 9.50                          Actual              impact Sweden, given the region’s importance as a key export market. That said,
                               Forw ard Implied
                               BoS Forecast
                                                   there are still factors that argue for a stronger krona. Central bank Governor Ingves
 9.20                                              recently suggested it was possible the Riksbank could move interest rates before
    Jun 17   Dec 17   Jun 18    Dec 18   Jun 19    the ECB. Moreover, model-driven estimates suggest that the SEK is fundamentally
                                                   undervalued. As such, we forecast 9.80 for year-end and 9.55 by end-2019.

                                                                                                          Marketing Communication |              5
Developed Markets FX Forecasts

                                        Curre nt   Jun- 1 8 Se p- 1 8 De c- 1 8 Mar- 1 9   Jun- 1 9 Se p- 1 9 De c- 1 9 Mar- 2 0   Jun- 2 0

                   Dollar Index (DXY)      89.8       91.7      90.3     89.0      87.6       86.3      85.7     85.6      85.6       85.6
U S Dolla r              USD/GBP           0.71       0.74      0.73     0.72      0.71       0.70      0.70     0.70      0.70       0.70
                         USD/EUR           0.81       0.83      0.81     0.80      0.79       0.78      0.77     0.77      0.77       0.77

                         GBP/USD           1.42       1.36      1.37     1.38      1.40       1.42      1.42     1.42      1.42       1.42
U K Pound
                         GBP/EUR           1.15       1.12      1.11     1.10      1.10       1.10      1.09     1.09      1.09       1.09
                         Effective         78.0       76.2      75.9     75.6      75.8       76.1      75.7     75.7      75.7       75.7

                         EUR/USD           1.23       1.21      1.23     1.25      1.27       1.29      1.30     1.30      1.30       1.30
Euro
                         EUR/GBP           0.87       0.89      0.90     0.91      0.91       0.91      0.92     0.92      0.92       0.92

                         USD/JPY            107       112       110       108       106       104       103       103       103        103
Ja p a nes e Yen         GBP/JPY            151       152       151       149       148       148       146       146       146        146
                         EUR/JPY            132       136       135       135       135       134       134       134       134        134

                         AUD/USD           0.77       0.77      0.78     0.78      0.78       0.79      0.79     0.79      0.79       0.79
A us tra lia n
                         GBP/AUD           1.83       1.77      1.76     1.77      1.79       1.80      1.80     1.80      1.80       1.80
Dolla r
                         EUR/AUD           1.60       1.57      1.58     1.60      1.63       1.63      1.65     1.65      1.65       1.65

                         USD/CAD           1.27       1.26      1.25     1.24      1.23       1.22      1.21     1.20      1.20       1.20
C a na d ia n
                         GBP/CAD           1.80       1.71      1.71     1.71      1.72       1.73      1.72     1.70      1.70       1.70
Dolla r
                         EUR/CAD           1.56       1.52      1.54     1.55      1.56       1.57      1.57     1.56      1.56       1.56

                         NZD/USD           0.73       0.72      0.71     0.71      0.70       0.70      0.69     0.69      0.69       0.69
New Zea la nd
                         GBP/NZD           1.93       1.89      1.93     1.94      2.00       2.03      2.06     2.06      2.06       2.06
Dolla r
                         EUR/NZD           1.68       1.68      1.73     1.76      1.81       1.84      1.88     1.88      1.88       1.88

                         USD/NOK           7.81       7.85      7.64     7.44      7.24       7.05      6.92     6.92      6.92       6.92
Norweg ia n
                         GBP/NOK          11.06     10.68     10.47     10.27     10.14     10.02       9.83     9.83      9.83       9.83
Krone
                         EUR/NOK           9.63       9.50      9.40     9.30      9.20       9.10      9.00     9.00      9.00       9.00

                         USD/SEK           8.36       8.26      8.05     7.84      7.64       7.48      7.38     7.35      7.31       7.31
Swed is h
                         GBP/SEK          11.84     11.24     11.03     10.82     10.69     10.62     10.49     10.43     10.38      10.38
Krona
                         EUR/SEK          10.30     10.00       9.90     9.80      9.70       9.65      9.60     9.55      9.50       9.50

                         USD/CHF           0.96       0.96      0.95     0.94      0.94       0.93      0.93     0.93      0.93       0.93
Swis s Fra nc            GBP/CHF           1.35       1.30      1.30     1.30      1.31       1.32      1.32     1.32      1.32       1.32
                         EUR/CHF           1.18       1.16      1.17     1.18      1.19       1.20      1.21     1.21      1.21       1.21
Source: Bloomberg, BoS

6   |   Marketing Communication
Fundamental Views – BRIC FX

                                          USD/BRL
USD/BRL
                                          Events could not have unravelled more unfavourably for the Brazilian real over the past
3.60
                                          month. Political risk ahead of October’s presidential, legislative and state elections
                                          rose dramatically after Brazil’s former President Luiz Inacio Lula da Silva was jailed.
3.40
                                          This, combined with a surprise 25bps interest rate cut by the BCB and the promise of
                                          further easing in policy, led USD/BRL to break above 3.35 for the first time since May
                                          last year. In light of the recent news, we maintain our view that events in the near term
3.20                                      are more likely than not to prove unfavourable for the real. Brazil’s fiscal sustainability
                       Actual
                                          is once again under question from investors due to fears of legislative paralysis, hence,
                       Forw ard Implied   the recent downgrade to Brazil’s credit rating by Fitch. Thankfully, a relatively frim set
                       BoS Forecast
3.00                                      of economic data from Brazil should help offset some of the near-term upside pressure
   Jun 17 Dec 17 Jun 18 Dec 18 Jun 19     on USD/BRL. At the same time, it is difficult to make a strong case for an immediate
                                          reversal of the past month’s gains. We forecast USD/BRL to end the year at 3.37.

                                          USD/RUB
USD/RUB                                   USD/RUB spiked higher in April after the US applied a fresh set of sanctions against
                                          Russia. Yet even with a spike above 63, the move has not warranted immediate
66.0
                                          intervention. Meanwhile, there are plenty of reasons to expect a sudden reversal of
64.0
                                          recent gains. First, Russia’s improved fiscal position led S&P to restore Russia’s
62.0                                      investment-grade rating in February. Now, all three major rating agencies have an
60.0                                      investment-grade rating in place. In addition, Russia’s economy is in recovery, albeit at
58.0                                      a sluggish pace. At the very least, firmer oil prices compared to last year provide a
56.0
                                          headwind to USD/RUB gains. Still, the risks to our forecasts remain high. Recent
                      Actual              geopolitical events may lead to a permanent rise in the risk premium required to
54.0                  Forw ard Implied
                      BoS Forecast        attract investment into Russia. Before the fresh sanctions we also expected the Russian
52.0
                                          central bank would maintain its easing cycle, as inflation remains well below the 4%
   Jun 17 Dec 17 Jun 18 Dec 18 Jun 19
                                          target. Lower interest rate will make the ruble less attractive from a carry perspective,
                                          even if crude oil prices move higher.

USD/INR             Actual                USD/INR
70.0                Forw ard Implied      USD/INR managed to consolidate around the 65 level over the past month. Looking
                    BoS Forecast
                                          ahead, there are plenty of reasons for USD/INR to rise modestly over our forecast period.
68.0                                      First, India’s economy is highly reliant on crude oil imports. As a result, higher crude oil
                                          prices compared to last year will ultimately raise India’s demand for US dollars. Secondly,
66.0                                      reform efforts to boost economic activity, a key factor in supporting currency inflows,
                                          have slowed ahead of parliamentary elections in 2019. Finally, and above all, some of
                                          the key valuations metrics point to overvaluation. This, combined with the fact that India’s
64.0
                                          banks and companies continue to wrestle with weak balance sheets, could undermine
                                          investment. Granted, India’s GDP growth accelerated to 7.2% y/y in Q4 last year
62.0
                                          compared to 6.5% y/y in Q3, but we see the risks to future growth projections as skewed
   Jun 17 Dec 17 Jun 18 Dec 18 Jun 19
                                          to the downside. We forecast USD/INR at 65.5 at end 2018.

USD/CNY               Actual              USD/CNY
                      Forw ard Implied    The Chinese renminbi is up by around 3% against the US dollar this year, but we believe
                      BoS Forecast        at current levels it is overvalued. When measured against a PBoC-designated basket of
6.80
                                          currencies, the renminbi is at an almost 2-year high. Granted, much of the recent
                                          upswing has been largely a US dollar move, and therefore unlikely to drive PBoC
6.60
                                          intervention. Nevertheless, should trade-war and tariff rhetoric with the US persists, the
                                          risk of devaluation has increased. Any intervention, however, would represent a retreat
6.40                                      from promised efforts to liberalise the exchange rate, and therefore risk rebuke from
                                          other trading partners. Even so, the degree to which the renminbi has been thus far
                                          allowed to appreciate would suggest there is a bias for USD/CNY to bounce back from
6.20
                                          its c.6.25 low in coming months. Should the US dollar, retrace some of its losses as we
   Jun 17 Dec 17 Jun 18 Dec 18 Jun 19
                                          anticipate, this would only put further upward pressure on USD/CNY.

                                                                                                  Marketing Communication |              7
Key EM Currency Forecasts

                                   Curre nt   Jun- 1 8 Se p- 1 8 De c- 1 8 Mar- 1 9   Jun- 1 9 Se p- 1 9 De c- 1 9 Mar- 2 0   Jun- 2 0

                         USD/BRL      3.42       3.32      3.35     3.37      3.40       3.42      3.45     3.47      3.47       3.47
Bra z ilia n Rea l       GBP/BRL      4.85       4.52      4.59     4.65      4.76       4.86      4.90     4.93      4.93       4.93
                         EUR/BRL      4.22       4.02      4.12     4.21      4.32       4.41      4.49     4.51      4.51       4.51

                         USD/RUB      63.5       59.0      58.2     57.5      57.8       58.0      58.1     58.5      58.5       58.9
Rus s ia n
                         GBP/RUB      89.9       80.2      79.7     79.4      80.9       82.4      82.5     83.1      83.1       83.6
Roub le
                         EUR/RUB      78.3       71.4      71.6     71.9      73.4       74.8      75.5     76.1      76.1       76.6

                         USD/INR      65.0       64.5      65.0     65.5      66.0       66.5      67.0     67.5      68.0       68.0
Ind ia n Rup ee          GBP/INR      92.0       87.7      89.1     90.4      92.4       94.4      95.1     95.9      96.6       96.6
                         EUR/INR      80.1       78.0      80.0     81.9      83.8       85.8      87.1     87.8      88.4       88.4

                         USD/CNY      6.30       6.40      6.42     6.45      6.50       6.52      6.55     6.56      6.58       6.59
C hines e
                         GBP/CNY      8.91       8.70      8.80     8.90      9.10       9.26      9.30     9.32      9.34       9.36
Renm inb i
                         EUR/CNY      7.76       7.74      7.90     8.06      8.26       8.41      8.52     8.53      8.55       8.57

                         USD/CZK      20.6       21.0      20.6     20.2      19.5       19.1      18.9     18.9      18.9       18.9
C z ech Koruna           GBP/CZK      29.1       28.5      28.2     27.8      27.3       27.1      26.9     26.9      26.9       26.9
                         EUR/CZK      25.4       25.4      25.3     25.2      24.8       24.6      24.6     24.6      24.6       24.6

                         USD/HUF     252.9     257.9     254.3     250.0     245.8     241.9     239.9     239.8     239.6      239.6
Hung a ria n
                         GBP/HUF     358.0     350.7     348.4     345.0     344.2     343.4     340.7     340.5     340.3      340.3
Forint
                         EUR/HUF     311.5     312.0     312.8     312.5     312.2     312.0     311.9     311.7     311.5      311.5

                         USD/PLN      3.41       3.47      3.41     3.35      3.30       3.24      3.22     3.22      3.22       3.22
Polis h Zloty            GBP/PLN      4.83       4.72      4.68     4.63      4.62       4.60      4.57     4.57      4.57       4.57
                         EUR/PLN      4.20       4.20      4.20     4.19      4.19       4.18      4.18     4.18      4.18       4.18

                         USD/MXN     18.32     18.50     18.40     18.20     18.10     18.05     18.00     17.90     17.90      17.90
Mexica n Pes o           GBP/MXN     25.93     25.16     25.21     25.12     25.34     25.63     25.56     25.42     25.42      25.42
                         EUR/MXN     22.57     22.39     22.63     22.75     22.99     23.28     23.40     23.27     23.27      23.27

                         USD/ZAR     12.09     13.05     13.10     13.15     13.20     13.25     13.27     13.30     13.30      13.30
South A frica n
                         GBP/ZAR     17.12     17.75     17.95     18.15     18.48     18.82     18.84     18.89     18.89      18.89
Ra nd
                         EUR/ZAR     14.90     15.79     16.11     16.44     16.76     17.09     17.25     17.29     17.29      17.29

                         USD/TRY      4.07       3.90      3.85     3.85      3.75       3.70      3.70     3.65      3.60       3.60
Turkis h Lira            GBP/TRY      5.76       5.30      5.27     5.31      5.25       5.25      5.25     5.18      5.11       5.11
                         EUR/TRY      5.02       4.72      4.74     4.81      4.76       4.77      4.81     4.75      4.68       4.68

Source: Bloomberg, BoS

8   |   Marketing Communication
Fundamental Views – UK Interest Rates

                                                  UK Pound
                                                  Conflicting forces affected UK short- and longer-dated interest rates over the past
    %                      3m libor
7                                                 month. Rates at the short end of the government yield curve continued to move
                           5yr swap
6                                                 higher, driven by the sixth rise in US interest rates in late March and growing
                           10yr swap
5
                                                  expectations that the Bank of England will continue to push UK interest rates higher.
                                                  At the longer end of the curve, yields continued to ease, as rising trade tensions
4
                                                  between the US and China raised concerns about the global growth outlook. As a
3
                                                  consequence, the yield curve flattened appreciably, with the spread between 2-yr
2                                                 and 10-yr gilts narrowing to 50bp – the lowest since September 2016.
1                                                 At its policy meeting last month, two (external) members of the Monetary Policy
0                                                 Committee – Michael Saunders and Ian McCafferty – voted to raise UK Bank Rate by a
 2006 2008 2010 2012 2014 2016 2018 2020
                                                  further quarter point, to 0.75%. The other seven members were content to leave rates
                                                  on hold, but noted, amid an ongoing decline in spare capacity, that “some withdrawal
                                                  of monetary policy is likely to be appropriate over the coming months”. This is most
                                                  likely to occur next month, when the committee revisits its economic forecasts and the
                                                  Bank publishes its next quarterly Inflation Report. At the time of writing, the implied
                                                  probability the market attaches to a 25bp rate rise in May is around 90%.
                                                  Expectations of a May rate rise continue to hold up, despite a slightly more mixed
                                                  economic backdrop. In February, the annual rate of consumer price inflation
    %              Bank Rate
7                                                 dropped by slightly more than expected, from 3.0% to 2.7%. Meanwhile, the latest
                   BoS forecast
6                                                 purchasing managers’ surveys for construction and services eased back. The
                   Market implied
5                  expectation                    weakness, however, seems mainly attributable to the extremely poor weather in early
4                                                 March, which hit the construction sector especially hard.
3                                                 Other indicators, notably the labour market data, have remained resilient.
2                                                 Employment in the three months to February surged by 168k, pulling the
1                                                 unemployment rate back down to 4.3%. Pay growth also accelerated to 2.8% – its
0                                                 highest since 2015. Meanwhile, the summary balance reported in the latest Lloyds
 2006 2008 2010 2012 2014 2016 2018 2020
                                                  Bank Business Barometer was little changed at +32 in March.
                                                  Overall, we expect UK Bank rate to rise twice this year – in May and November –
                                                  and for the yield on the 10-yr gilt benchmark to resume its gradual ascent, ending
                                                  the year at 1.8% (currently 1.4%). This assumes global trade tensions do not
                                                  escalate much further.

Key Bond and Money Market Forecasts
                                       C urrent Jun-18 Sep -18 Dec-18 Ma r-19 Jun-19 Sep -19 Dec-19 Ma r-20 Jun-20
    Key Policy Rate                      0.50   0.75     0.75       1.00      1.00       1.00      1.25       1.25       1.50      1.50
    3-month interbank rate               0.8    0.8      0.9         1.0       1.1       1.2        1.3        1.4        1.5      1.6
    2-year bond yield                    0.9    0.9       1.0        1.1       1.1       1.2        1.3        1.4       1.4        1.5
GBP 10-year bond yield                   1.4    1.6       1.7       1.8       1.8        1.9        2.0        2.1       2.2       2.3
    5-year swap rate                      1.3   1.4       1.5        1.5      1.6         1.7       1.8        1.8       1.9       2.0
    10-year swap rate                     1.5   1.6       1.7        1.7      1.8        1.9        1.9        2.0       2.1       2.2

    Key Policy Rate                      1.75   2.00     2.25      2.25       2.50       2.75      3.00       3.00       3.00      3.00
    3-month interbank rate               2.3    2.3      2.4       2.6        2.7        2.9       3.2        3.2        3.2       3.2
    2-year bond yield                    2.3    2.3      2.4       2.6        2.7        2.8       2.9         3.0        3.1      3.2
USD 10-year bond yield                   2.8    2.9       3.0       3.0        3.1        3.1      3.2        3.2        3.2       3.2
    5-year swap rate                     2.7    2.8      2.8       2.9        2.9         3.0       3.0        3.1        3.1       3.1
    10-year swap rate                    2.8    2.9      2.9        3.0        3.0        3.0       3.1        3.1        3.1       3.1

    Key Policy Rate                      0.00   0.00     0.00       0.00      0.00       0.10      0.10       0.25      0.25       0.50
    3-month euribor                      -0.3   -0.3     -0.3       -0.2      -0.2        0.0       0.1        0.3       0.3       0.6
    2-year bond yield                    -0.6   -0.5     -0.4       -0.3      -0.2        0.0       0.1        0.3       0.5        0.7
EUR 10-year bond yield                    0.5    0.7      0.8        0.9       1.0       1.2        1.3        1.4       1.5       1.6
    5-year swap rate                      0.3    0.5      0.6        0.7       0.8        1.0       1.1        1.2       1.3       1.4
    10-year swap rate                     0.9    1.1      1.2        1.3       1.4        1.5      1.6         1.6       1.7        1.7
Source: Bloomberg, BoS

                                                                                                      Marketing Communication |             9
Fundamental Views – Interest Rates

    %                       3m libor
                                              US Dollar
6
                            5yr swap          The Federal Reserve raised interest rates at its March meeting by a quarter point to
5                                             1.75%, in line with expectations. It was the sixth increase since it began increasing
                            10yr swap
4                                             rates in December 2015. The updated ‘dot plot’ continued to signal a median of
                                              three rate rises to 2.25% this year, although there was a notable leaning towards
3                                             four increases, while the median projection for 2019 was raised to three hikes from
2                                             two previously. The Fed revised up its economic growth forecasts, supported by
                                              fiscal policies, although the projections for inflation were broadly unchanged, as
1                                             there may be a potential uplift to investment and productivity. Trade tensions with
0                                             China may yet impact on economic prospects, but policymakers for now maintain
 2006 2008 2010 2012 2014 2016 2018 2020      their expectation of gradually rising rates.
                                              Latest indicators point to annualised growth continuing in excess of 2% in Q1,
                                              supported by resilient consumer spending, stronger investment spending and an
                                              inventory rebound. Employment growth slowed to 103k in March, but that followed
                                              a very strong outturn of 326k in February. The average monthly increase in Q1 was
     %
6                   Fed funds rate            about 200k, above the 182k average for 2017. The unemployment rate stayed at
                                              the cyclical low of 4.1%, but wage growth increased only modestly to 2.7% from
5                   BoS forecast
                                              2.6%. Policymakers will be watching wage growth very closely to gauge the
4                                             tightness of the labour market.
                    Market implied
                    expectation
3                                             A downward spiral of ‘tit-for-tat’ tariff measures with China remains a risk to the
2                                             economic outlook, but our central view continues to be that the Federal Reserve will
                                              raise interest rates two more times this year to 2.25%, with the next hike expected at
1
                                              the June meeting. A further three rate increases to 3% are forecast for 2019. We see
0                                             further curve flattening over the forecast period, with 2-year Treasury yields seen
 2006 2008 2010 2012 2014 2016 2018 2020
                                              rising to 2.6% at end-2018 and 3.0% at end-2019, while rises in 10-year Treasury
                                              yields are forecast to be limited to 3.0% and 3.2% over the same respective periods.

                                              Euro
                                              After the last meeting on 8 March, the European Central Bank removed its ‘easing
6
    %                       3m euribor        bias’ on net bond purchases, increasing the likelihood that they will be wound
                            5yr swap
                                              down by the end of the year, which would pave the way for interest rates to start
5
                                              rising in 2019. Average monthly net bond buying has already fallen to €30bn, the
                            10yr swap
4
                                              lowest since the asset purchase programme began in March 2015. At the same
3                                             time, the ECB has been careful not to attach a definite end date to the asset
2                                             purchase programme.
1
                                              In 2017, the Eurozone economy recorded the strongest growth for a decade, but
0                                             more recent data releases point to a possible moderation in the pace of expansion
-1                                            after the 0.6%q/q increase in Q4. Any softening, however, may prove to be
  2006 2008 2010 2012 2014 2016 2018 2020     temporary. The manufacturing PMI fell to 56.6 in March, still well above the 50
                                              growth/contraction level, but it is well below the peak of 60.6 in December. The
                                              services PMI declined to 54.9 in March after reaching a high of 58.0 in January.
                                              ‘Hard’ data, such as industrial production and retail sales, also point to a soft start to
                                              the year. In terms of inflation, headline CPI increased to 1.4% in March from 1.1% in
 %                    ECB refi rate           February, but the ‘core measure (excluding food and energy) stayed at only 1.0%.
 4.5
 4.0                                          The ECB anticipates a gradual rise in core inflation over the projection period,
                      BoS forecast
 3.5                                          although forecasts in recent years have overestimated the upswing.
 3.0
 2.5                  Market implied
                      expectation             Our central view is that the ECB will continue with monthly net asset purchases of
 2.0
 1.5                                          €30bn until September before tapering towards zero by the end of the year, with
 1.0
                                              interest rates set to be increased from mid-2019. Policymakers have indicated that
 0.5
 0.0                                          a deeper discussion on future policy will take place around the middle of this year.
-0.5
                                              Recent negative surprises in economic data, as well as the potential impact of
    2006 2008 2010 2012 2014 2016 2018 2020
                                              rising global protectionism, may increase the ECB’s caution on how quickly to
                                              withdraw policy stimulus. Our baseline forecast is for the main refinancing rate to
                                              rise to 0.25% by the end of next year, while targets for 10 year bund yields are
                                              0.9% at end-2018 and 1.4% at end-2019.

10       |   Marketing Communication
Fundamental Views - Inflation

           Inflation Rates                       Inflation Trends
                                                 Heightened trade tensions between the US and China have introduced a new
                                                 dimension to the global inflation outlook. At this stage, the ‘tit-for-tat’ announcement
                                                 of import tariffs and trade sanctions is not expected to have a material impact on the
                                                 broader inflation environment, although that could change if the tensions escalate
                                                 into a full-blown trade war. While the US and China would be the primary targets, the
                                                 resulting rise in import/export prices would likely have wider repercussions.

                                                 For now, however, it is largely domestic rather than external considerations that
                                                 continue to drive the inflation outlooks in the Eurozone, the US and the UK. In the
                                                 Eurozone, the prevailing degree of spare capacity continues to constrain price
                                                 pressures. In March, the headline rate of inflation rose from 1.1% to 1.4%, on the
                                                 advanced estimate, largely due to a pick-up in food prices. Core inflation,
                                                 meanwhile, was unchanged for the third consecutive month, at 1.0%. Both rates
                                                 remain well below the ECB’s target ceiling of 2%. More recently, mixed economic
                                                 data strengthen our view that any rise in euro area inflation is likely to remain gradual.

                                                 In the US, headline inflation continues to edge higher. In February, the annual rate of
                                                 consumer price inflation rose to 2.2% from 2.1% the month before. The Fed’s
                                                 preferred measure of inflation, the personal consumption expenditure deflator, also
                                                 picked up from 1.7% to 1.8% – its highest in almost a year. Although the latest gain in
      Inflation Expectations                     US employment was weaker than expected, this follows a sustained period of strong
                                                 jobs growth, which now appears to be putting some upward pressure on wages.
                                                 Since last October, annual earnings growth has risen from 2.3% to 2.7%. Rising wage
                                                 pressures and the lagged impact of a weak US dollar are expected to put further
                                                 upward pressure on PCE deflator over the coming months, justifying additional
                                                 policy tightening.

                                                 In contrast, inflation pressures in the UK appear to be easing. Having peaked at just
                                                 over 3.0% in November, the annual rate of consumer price inflation fell to 2.7% in
                                                 February. It should drop further over the coming months as the base effects from the
                                                 earlier fall in the pound and the associated rise in import prices continue to fade.
                                                 Although the trade-weighted level of the pound is still well below its pre-EU
                                                 referendum level, it has risen by over 7% since last August.

                                                 While dissipating import price rises should continue to bear down on UK inflation,
                                                 rising domestic pressures pose an upside risk. The combination of limited spare
                                                 capacity, rising pay growth and weak productivity, are expected to limit the extent
                                                 and speed of the fall in inflation over the coming months and quarters. While we
                                                 expect inflation to converge back to around 2% over the medium term, this is likely to
                                                 require further, albeit ‘limited and gradual’, rises in interest rates.

Inflation Outlook
                                Avg since '97     Latest      Period '18 Q1 '18 Q2 '18 Q3 '18 Q4 '19 Q1 '19 Q2 '19 Q3 '19 Q4

GBP CPI inflation %                        2.0        2.7     Feb-18       2.9      2.7     2.6      2.4      2.2     2.2      2.2     2.2

USD CPI inflation %                        2.2        2.2     Feb-18       2.2      2.5     2.4      2.2      2.2     2.2      2.2     2.2
        Core CPI inflation %               2.0        1.8     Feb-18       2.0      2.2     2.3      2.2      2.2     2.2      2.2     2.2
        PCE deflator %                     1.8        1.8     Feb-18       1.9      2.0     1.7      1.8      2.0     2.0      2.0     2.0
        Core PCE deflator %                1.7        1.6     Feb-18       1.8      1.9     2.0      2.0      2.0     2.0      2.0     2.0

EUR HICP inflation %                       1.7        1.4     Mar-18       1.3      1.5     1.7      1.7      1.6     1.6      1.6     1.6
        Core HICP inflation %              1.4        1.0     Mar-18       1.0      1.1     1.2      1.4      1.5     1.5      1.6     1.7

Source: Bloomberg, BoS

                                                                                                     Marketing Communication |           11
Key Economic and Political Events Calendar

2018 Central Bank Meetings                                             2018 Political Events

APRIL                                                                  APRIL
Country      Date        Event                                         Country    Date        Event

EZ           26          ECB rate decision

MAY                                                                    MAY
Country      Date        Event                                         Country    Date        Event

US           2           FOMC policy announcement                      UK         3           Local elections
UK           10          BoE MPC announcement + Inflation Report       EU         17          EU Summit

JUNE                                                                   JUNE
Country      Date        Event                                         Country    Date        Event

US           13          FOMC policy announcement + press conference   EU         28/29       EU Summit
EZ           14          ECB rate decision
UK           21          BoE MPC announcement

JULY                                                                   JULY
Country      Date        Event                                         Country    Date        Event

EZ           26          ECB rate decision

AUGUST                                                                 AUGUST
Country      Date        Event                                         Country    Date        Event

US           1           FOMC policy announcement
UK           2           BoE MPC announcement + Inflation Report

SEPTEMBER                                                              SEPTEMBER
Country   Date           Event                                         Country   Date         Event

UK           13          BoE MPC announcement                          UK         30/9 - 3/10 Conservative Party Conference
EZ           13          ECB rate decision
US           26          FOMC policy announcement + press conference

OCTOBER                                                                OCTOBER
Country      Date        Event                                         Country    Date        Event

EZ           25          ECB rate decision                             EU         18/19       EU Summit

NOVEMBER                                                               NOVEMBER
Country      Date        Event                                         Country    Date        Event

UK           1           BoE MPC announcement + Inflation Report       US         6           Midterm elections
US           8           FOMC policy announcement

DECEMBER                                                               DECEMBER
Country      Date        Event                                         Country    Date        Event

EZ           13          ECB rate decision                             EU         13/14       EU Summit
US           19          FOMC policy announcement + press conference
UK           20          BoE MPC announcement

Source: Bloomberg, BoS

12   |    Marketing Communication
Contacts

Research                                                                Global Corporate FX
Jeavon Lolay                        Eric Wand                           Anders Nilsson
Head of Economics & Strategy        Rates Strategist                    +44 (0)20 7050 6006
Tel: +44 (0) 20 7158 1742           Tel: +44 (0) 20 7158 8231           anders.nilsson@lloydsbanking.com
jeavon.lolay@lloydsbanking.com      eric.wand@lloydsbanking.com
                                                                        Mid Markets & SME
Adam Chester                        Robin Wilkin
Head of Economics                   Cross Market Strategist             Lars Olesen
Tel: +44 (0) 20 7158 1740           Tel: +44 (0) 20 7158 1637           +44 (0)20 7158 6252
adam.chester@lloydsbanking.com      robin.wilkin@lloydsbanking.com      lars.olesen@lloydsbanking.com

Carl Paraskevas                     Gajan Mahadevan                     Financial Institutions
Senior Economist                    FX Strategist
                                                                        Adrian Walkling
Tel: +44 (0) 20 7158 1741           Tel: +44 (0) 20 8975 5016
                                                                        +44 (0) 20 7158 1888
carl.paraskevas@lloydsbanking.com   gajan.mahadevan@lloydsbanking.com
                                                                        adrian.walkling@lloydsbanking.com
Rhys Herbert                        Henry Occleston
Senior Economist                    Associate
Tel: +44 (0) 20 7158 1743           Tel: +44 (0) 20 7158 1737
rhys.herbert@lloydsbanking.com      henry.occleston@lloydsbanking.com

Hann-Ju Ho                          Jennifer Lee
Senior Economist                    Designer
Tel: +44 (0) 20 7158 1745           +44 (0)20 7158 1744
hann-ju.ho@lloydsbanking.com        jennifer.lee@lloydsbanking.com

Nikesh Sawjani
UK Economist
Tel: +44 (0) 20 7158 1749
nikesh.sawjani@lloydsbanking.com
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This document has been prepared by Lloyds Bank Lloyds Bank is a trading name of Lloyds Bank plc and Bank of Scotland plc.
which are both subsidiaries of Lloyds Banking Group plc. Lloyds Bank plc. Registered Office: 25 Gresham Street, London EC2V
7HN. Registered in England and Wales no. 2065. Bank of Scotland plc. Registered Office: The Mound, Edinburgh EH1 1YZ.
Registered in Scotland no. SC327000. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct
Authority and the Prudential Regulation Authority under registration numbers 119278 and 169628 respectively.
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