EUR/NOK: In the near term, we expect the drop in the oil price together with a Norges Bank cut and dovish stance to send the cross temporarily higher above our new 1M forecast of 8.75 (previously 8.65). Post the dovish March surprise we still expect a re-pricing of Norges Bank, ECB QE and an oil price recovery to drag the cross lower towards 8.50 in 3M, 8.25 in 6M and 8.15 in 12M.
EUR/SEK: Better-than-expected Swedish macro data have weighed on EUR/SEK recently: ECB QE remains a negative for EUR/SEK, while any backfiring by the Riksbank is a positive for the pair. We see mainly upside risks in the short term but believe the SEK will outperform in the medium term, targeting 9.20 in 1M (previously 9.30), 9.20 in 3M, 9.10 in 6M and 8.90 in 12M.
EUR/DKK: We have revised up our forecast on EUR/DKK to 7.4490 on 12M (prev. 7.4440) as downside pressure has eased in March. The cross is historically volatile at the moment and we see potential for a temporary drop to 7.4440 triggering FX intervention purchases by Danmarks Nationalbank.
EUR/USD: We have lowered the level of our EUR/USD forecasts and see the cross below parity mid year but we keep our long-standing V-profile. While we have been calling for the cross to head lower, the latest sell-off has proved more violent than we imagined, not least as the ECB QE effect has proved more EUR negative than expected. We expect EUR/USD to remain soft on a 3-6M horizon as the effects of ECB QE and the warm-up to Fed policy normalisation continue to weigh, and now see the cross at 0.99 (previously 1.05) in 6M. We maintain, however, that a rebound will be in store towards year end as the ECB embraces a rise in euro-zone inflation, and as the Fed tightens policy only very slowly following an early first hike. We now target 1.08 in 12M (prev. 1.12).
EUR/GBP: Omnipresent EUR weakness has induced a level shift in EUR/GBP and we have lowered our forecast profile. But, with BoE set to be a 'light' version of the Fed, we still look for a bottom in the cross in 6M, now targeting 0.68 (prev. 0.72). On a 1-3M horizon the UK general election could be a source of weakness/volatility and cap the GBP upside potential. In light of the recent drop in the cross we have lowered our 1-3M forecasts to 0.70 (both previously at 0.74). In 12M we target 0.71 (0.73).
USD/JPY: We have pencilled in slightly more upside in USD/JPY as the market has advanced some of the strength we have been projecting in the cross on 12M. We still do not expect any more easing from the BoJ and thus see the cross driven mainly by a re-pricing of Fed and thus that upside in the cross should be seen mainly on a 3M horizon. We now target 127 (prev. 126) in 12M.
EUR/CHF: We have kept our EUR/CHF forecasts largely unchanged and continue to target 1.10 in 12M. We expect the SNB to keep policyrates unchanged at the March meeting, but in light of its price-stability mandate the SNB will likely have to advise how it expects to bring inflation back to target. We expect the central bank to stay in easing (cutting and/or intervention) mode still, which should eventually send EUR/CHF higher. In the near term, risks are to the downside though as the EUR stays under pressure. We target 1.05 in 1M.
USD/CNY: Upside risk on USD/CNY has increased after weak data suggest that there could already be downside risk to the government's 7% growth target for 2015. We have revised our forecast for USD/CNY slightly higher but still expect CNY to appreciate moderately within a broadly stable daily trading band in 2015.
EMEA: Overall, we have moved our forecasts for the CEE currencies in a slightly more positive direction on continued positive effects from the ECB's QE programme and a more positive outlook for growth. We remain bearish on the outlook for the rouble on the back of large political and geopolitical risks and a sharp drop in Russian economic activity, but we nonetheless moved our forecast in a less negative direction than our previous forecast on a slightly more stable geopolitical situation.
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