EUR/NOK. Fundamentally, we still see an appealing case for why the NOK should strengthen over the coming year on not least broader-based Norwegian growth, valuation and relative rates stemming from Norges Bank initiating a moderate hiking cycle. Meanwhile, the fundamental case has been weakened slightly over the last month by global growth levelling off and domestic data disappointing slightly. Also tactically, positioning is becoming a headwind for the NOK as investors have bought heavily into the case of a stabilising housing market and forthcoming rate hikes. This leaves the NOK vulnerable to profit taking and we therefore expect EUR/NOK to be range-trading near-term. In light of this we raise our 1M forecast to 9.60 (from 9.50) but leave the rest of the profile unchanged at 9.40 in 3M, 9.20 in 6M and 9.10 in 12M.
EUR/SEK. We acknowledge that EUR/SEK is at elevated levels. However, we believe that long-term-misalignment and mean-reversion calls suggesting that the cross is prone for substantial correction are premature. Because it would, in our view, require a clear fundamental trigger which we cannot really see. On the contrary, we have become more convinced that the Riksbank needs to back off from planned rate hikes and of a housing-fuelled economic slowdown - the building-blocks for our long-held bearish view on the SEK and to a large extent (together with risk aversion) the reasons why EUR/SEK has (b)reached our Q2-Q3 10.30 target already. Our short-term models suggest that EUR/SEK is overbought. We see room for shallow corrections, but argue that the cross is still a buy on dips. On balance, we raise the 1M forecast to 10.40 (10.20), 3M and 6M to 10.50 (10.30) and 12M to 10.20 (10.10).
EUR/DKK . Over the coming year, EUR/DKK will be in the hands of government finances as that will the determining factor for DKK liquidity and thus EUR/DKK FX forwards. We forecast EUR/DKK to stay around 7.4450 on 1-6M and to fall to 7.4425 (revised down from 7.4475) as there is a clear possibility relatively tight liquidity will continue to support DKK into next year.
EUR/USD. In our base case of a negotiated outcome of the trade war, EUR/USD should stay supported, and we note that the US dollar increasingly exhibits the properties of a carry currency and thus geopolitical tensions are no longer USD positive. But, short term, if the US holds up better than the euro zone growth- and earnings-wise, then equity flows could weigh on the cross. But our medium-term story remains unchanged: a turn in the capital tide from USD to EUR is brewing as the relative attractiveness of EU vs US assets is on the rise. Alongside valuation, this is set to support EUR/USD in 6-12M. A slide within the 1.21-1.26 range could be seen near term but a firm break higher on ECB will, in our view, constitute the next big move in the pair. We have kept our forecast profile unchanged and thus continue to see EUR/USD at 1.23 in 3M, 1.25 in 6M, and 1.28 in 12M.
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