FXFC

Question 1

What is a Forecast?

Answer 1

A prediction for an exchange rate provided by various contributors

Question 2

What is a Forward?

Answer 2

An exchange rate mathematically calculated using spot and interest rates of the respective currencies

Question 3

Which Forecasts don’t have tickers?

Answer 3

Cross-calculated forecasts (denoted by asterisks)

Question 4

How can we find contributor forecast methodology?

Answer 4

We can’t. BBG don’t have transparency into the methodologies used by individual contributors

Question 5

FX Forecasts are the _ _ _ _ _ _ for the specific period

Answer 5

Median (to remove outliers)

Question 6

Why do some currency pairs have less forecasts than others?

Answer 6

Due to fewer sources contributing forecasts

Question 7

What date are the values in the forecast row taken from?

Answer 7

Final date of period (Q1 2025 –> 31/03/25)

Question 8

Ranking methodology reflects the forecaster’s performance over what time period?

Answer 8

Current quarter + 3 previous ones

Question 9

What 3 factors does the FXFC Methodology consider?

Answer 9

Accuracy, Timing & Direction

Question 10

How is accuracy determined?

Answer 10

Percent difference between Forecast and actual FX rate at period-end

Question 11

What spot rate is used in the FXFC Methodology?

Answer 11

BFIX London 4pm on last day of the period

Question 12

Timing Example

Answer 12

For EURUSD forecast for Q1 25

Bank A predicts –> EURUSD = 1.06 in Oct 2024

Bank B predicts –> EURUSD = 1.06 in Feb 2025

31/03/25 4pm L BFIX Rate = 1.06

Both are accurate, but A predicted it correctly earlier with access to less market data

Question 13

Direction Example

Answer 13

At Time T, EURUSD = 1.3

In 2 months,
Forecaster A predicts EURUSD = 1.28
Forecaster B predicts EURUSD = 1.36

In 2 months, EURUSD = 1.31

Forecaster A is more accurate than B’s, however A predicted a move in the wrong direction

Question 14

What is the Eligibility criteria for a forecast?

Answer 14

1 Forecast has to be published between 15 months - 1 month before period end

e.g.

To be ranked for Q1 2025, the window would be (Q4 2023, Q1 2024, Q2 24, Q3 24, Q4 24, Q1 25 (before 28/02/25)

Question 15

How many forecasters are taken for each currency pair?

Answer 15

Top 10 or Top 20% (whichever is lower)

Question 16

What criteria does a forecaster need to meet to be eligible for regional rankings?

Answer 16

Must be eligible for minimum 3/5 (60%) of the currencies in the region

Question 17

What is a Benefit of Forecasting?

Answer 17

• Informs decision makers who rely on forecasts for hedging/investment decisions
• Allows forecasters to compare themselves to peers to differentiate their research and methodology
• Helps identify forecasters that may perform well/poorly for different currencies