EUR/NOK. We expect EUR/NOK to trade around current levels in the coming month with the very short-term risks skewed to the upside. We maintain the view that fundamentals limit the medium-term downside potential and that we have to see a growth pick-up at end-2016-17, together with a repricing of NOK rates, to trigger a sustainable move lower. We leave our EUR/NOK forecasts unchanged at 9.40 in 1M, 9.30 in 3M, 9.20 in 6M and 8.90 in 12M.
EUR/SEK. EUR/SEK has edged higher mainly as a result of weakening risk appetite. While the looming UK EU referendum may weigh further on risk sentiment, the macro backdrop is highly supportive for the downside. Hence, we have raised our 1M target to 9.20 (9.10) and kept 3-12M targets intact at 9.10, 9.00 and 8.90, respectively.
EUR/DKK. DN will probably need to step in to support EUR/DKK with FX intervention in the coming months as we look for DKK to stay supported by a tighter policy rate spread to ECB, a low net position, hedging of potential EUR risk due to the UK's EU referendum in June and in the near-term foreigners buying DKK at the Dong IPO on 10 June. We forecast EUR/DKK will trade at 7.4375 on 1-12M (revised down from 7.4425) with downside risk to 7.4350, where we look for DN to cap EUR/DKK through FX intervention.
EUR/USD. We believe that the risks are to the downside near term. First, positioning is now much more clean than it was earlier in the year. Second, we believe that the market is too negative on the US economy. Third, we believe that Brexit risks will weigh on EUR/USD up to the referendum on 23 June. Our base case remains that the UK stays in the EU but we do not believe a 'remain' vote would lead to a significant EUR/USD rally. A 'remain' vote would open the door for a Fed September rate hike. We keep our forecast profile unchanged, which leaves some downside near term (1-3M forecast at 1.12, which is based on no Brexit) followed by a sustained move higher towards 1.18 in 12M as valuation and the US-Europe current account differential should support a higher EUR/USD over the medium term.
EUR/GBP. In the UK, every thing continues to be driven by the upcoming EU referendum. We have kept our forecast unchanged expecting EUR/GBP to move higher ahead of the referendum day on 23 June. We target the cross at 0.80 in 1M. Longer term, the outlook for EUR/GBP very much depends on the outcome of the EU referendum. In our main scenario, we assume a status quo for the UK, meaning that people vote to remain in the EU, and we target EUR/GBP at 0.76 in 3M, 0.74 in 6M and 0.75 in 12M but stress that these forecasts are subject to significant digital risk.
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