EUR/NOK . The latest move lower in EUR/NOK seems slightly overdone according to the coinciding moves in near-term FX drivers. As a result, we find it likely that the cross will take a 'breather' and settle in the 8.80-9.00 range over coming months. Longer term, normalising growth, real rate spreads, oil markets and valuation forces should act as a drag on the cross but we fear markets are too optimistic about the medium- to long-term outlook for the business cycle, which should limit the downside potential in H2 17. We shift lower our EUR/NOK profile, forecasting the cross at 8.90 in 1M (from 9.00.), 8.80 in 3M (8.90), 8.70 in 6M (8.80) and 8.70 in 12M (unchanged).
EUR/SEK . After a sharp rebound in the krona, EUR/SEK consolidated just above 9.40, our 3M target, ahead of the Riksbank's February meeting. The decision to keep the easing bias intact at -6bp was somewhat dovish but the market impact was muted. The Riksbank will probably end QE this summer but we do not expect it to raise rates before well into 2018. The former decision could lend support to the krona but this effect would be mitigated by signalling a very slow hiking path, including maintaining the current easing bias for longer. We keep our forecast profile intact at 9.40, 9.30 and 9.20 in 3M, 6M and 12M and lower 1M from 9.50 to 9.40.
EUR/DKK . We expect EUR/DKK to continue trading close to Danmarks Nationalbank's intervention target of around 7.4340 ahead of the French election, while we should see some relief following our base case of a Marine Le Pen defeat. EUR/DKK FX forwards are trading around 'Brexit' levels from 2016. We maintain our forecasts of 7.4350 in 1-3M and 7.4400 in 6-12M. EUR/DKK may see some temporary support in the final weeks of March, when Danish listed firms pay out the bulk of their dividends.
EUR/USD . We keep our EUR/USD forecasts unchanged, expecting EUR/USD to reach 1.04 in 1M, 1.05 in 3M, 1.08 in 6M and 1.12 in 12M. Over the coming one to three months, we expect EUR/USD to head lower, supported by relative rates and our expectations that the Donald Trump administration is likely to announce details of corporate tax reforms, border tax adjustments and HIA2 in coming months. We stress that risks are skewed on the downside in the short term. In the medium to long term, we are EUR/USD bullish on valuation and the record-high EU-US current account differential. In addition, we believe that a substantially larger US budget deficit will be negative over time for the USD, as US real interest rates fall.
EUR/GBP . We still see potential for further GBP weakness in the near term, as the triggering of Article 50 moves closer. We target EUR/GBP at 0.87 in 1-3M (0.89 in 1M and 0.88 in 3M previously) but stress that the risk is skewed on the upside relative to our forecasts. Longer term,we keep our EUR/GBP forecasts unchanged at 0.86 on a 6M-12M horizon, reflecting our expectation of the GBP stabilising somewhat in the slightly longer term on attractive valuation of GBP-denominated assets, given the undervaluation of the UK currency.
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