E UR/NOK. We think markets have become too negative on global growth, which alongside OPEC+ production cuts is expected to send the oil price higher. Also, the domestic story is very constructive for the NOK as Norway is set to outperform peers in terms of both relative growth and rates. What is more, structural liquidity is set to tighten in Q1, which tends to coincide with a stronger NOK. In light of the EUR/NOK move higher, we raise our EUR/NOK forecast profile but still pencil in a lower spot. We now forecast EUR/NOK at 9.60 in 1M, 9.50 in 3M (NYSE:MMM) (previously 9.40), 9.40 in 6M (from 9.20) and 9.30 in 12M (9.10).
EUR/SEK. For many years, the Swedish money market curve was too steep relative to peers which suggested that re-pricing of the curve would push EUR/SEK higher; this is not the case anymore as market pricing of the Riksbank is now closely aligned with the ECB. The scope for re-pricing in relative terms is, in our view, perhaps more in favour of the SEK. But, we continue to look for a cyclical slowdown in 2019, a potential headwind for the krona. In all, we see only limited downside potential in EUR/SEK from here. We raise the 1M forecast to 10.20 and keep the 3, 6 and 12M forecasts intact at 10.10, 10.00 and 10.00.
EUR/DKK. EUR/DKK rose close to 7.4680 in December - a move which triggered DKK12bn in FX intervention by Danmarks Nationalbank. EUR/DKK peaked in December and we expect it to head lower from here. It will probably be a slow process as a firm recovery in equity markets is needed to spur DKK buying from domestic investors through rebalancing of FX hedges. At the same time, low front-end rates due to the high net position will slow the pace of DKK appreciation. We forecast EUR/DKK at 7.4640 in 1M, 7.4600 in 3M and 7.4550 in 6-12M.
EUR/USD. A higher range - now around 1.15 - is justified by a move higher in real rate spreads as the Fed has withdrawn support. As Q1 progresses, we expect the second stage of the EUR/USD rebound that we forecast this year to be reached with a another leg higher in the cross towards 1.20 mid year. We have lifted our short-term profile a tad and see EUR/USD at 1.15 in 1M, 1.17 (1.13) in 3M, 1.20 (1.18) in 6M, and 1.25 (unchanged) in 12M. In other words, while we do not yet have lift-off in the sense of new cycle-highs being within reach, the EUR/USD 'rocket', which valuation suggests will eventually escape gravity, is now on the launchpad - but a trade deal and/or a first ECB hike is needed for next stages of the firing to be reached.
EUR/GBP. Our EUR/GBP forecasts are based on our main scenario that May's Brexit plan eventually will be approved by parliament. We expect this to pave the way for a significant decline in EUR/GBP early spring. We target 0.84 in 3M, and 0.83 in 6-12M. However, Brexit is a 'digital event' and we emphasise that the key risk to our bullish GBP view is that Brexit clarifications are dragged out - even beyond 30 March if Article 50 is extended; in that case, GBP appreciation will be much more moderate and materialise later than our forecast (main scenario) implies.
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