EUR/NOK . With markets pricing a close-to-zero percent probability of a September rate cut, an 'unchanged' Norges Bank announcement next week would be unlikely to spur substantial NOK strength. Also, Norges Bank is likely to leave the door open for rate cuts, partly to maintain a weak NOK amid weak global growth and partly because of heightened uncertainty. While the risk of a Norges Bank cut has fallen significantly, we still think Norges Bank is likely to announce liquidity measures at some point in H2 in order to fight the heightened Nibor policy rate spread driven by regulatory changes in the US. In such a scenario, NOK rates would fall and the NOK would weaken. While the economic outlook in Norway has improved, global uncertainties have heightened. As a result, we leave our EUR/NOK forecasts unchanged.
EUR/SEK . Fundamentals and valuation are extremely favourable for the krona. Cyclical tailwinds have moderated, which has weighed on the SEK recently. Note however that in relative terms the growth outlook is still supportive of the downside. The Riksbank will match the ECB on QE extension as a way to counter any premature SEK appreciation. This is likely to keep EUR/SEK elevated for longer. We maintain our forecast profile, now at 9.40 in 1M, 9.30 in 3-6M and 9.10 in 12M.
EUR/DKK . We forecast EUR/DKK will trade at 7.4425 on 1-12M (revised up from 7.4400 on 1-3M and 7.4375 on 6-12M, respectively). Should renewed DKK appreciation pressure arise, we still look for Danmarks Nationalbank (DN) to cap EUR/DKK downside around 7.4350 by selling DKK in FX intervention.
EUR/USD . We keep our EUR/USD forecasts unchanged and still expect EUR/USD to continue to trade in the 'post-Brexit' range of 1.10-1.14 in coming months. We target EUR/USD at 1.12 in 1-3M. Longer term, we maintain our long-held view that the undervaluation of the EUR and the wide eurozone-US current account differential are longer term EUR positives. We target 1.14 in 6M and 1.18 in 12M.
EUR/GBP . We still expect EUR/GBP to trade higher in coming months, driven not only by Bank of England (BoE) easing but also by the considerable imbalances in the UK economy, not least the significant current account deficit. While data suggest that the UK may avoid recession in H2 16, we still expect the BoE to cut the Bank Rate by 15bp from 0.25% to 0.10% in November but it is a very close call and depends on data. We have revised our 1-6M EUR/GBP forecast slightly lower to 0.87 (previously 0.88) in 1M, 0.88 (previously 0.90) in 3M and 0.92 (previously 0.95) in 6M.
USD/JPY . In our main scenario, we expect the Bank of Japan (BoJ) to disappoint relative to market pricing at the 21 September meeting, suggesting that USD/JPY is likely to trade lower in the very near term. We target 101 in 1M and102 in 3M. Over the medium term, we see USD/JPY in the range of 100-105 targeting 104 in 6-12M.
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