EUR/NOK. Norges Bank stands out as the only G10 central bank hiking policy rates. With the outlook for hikes in both June and December this year, we think relative rates will become an increasingly NOK-supportive factor. Indeed, rates markets are pricing only one hike for the whole year. Oil prices are also increasingly becoming a supportive factor as OPEC+ production cuts, geopolitical worries and speculative positioning are all sending the black gold higher. If we are right in assuming the global economy will rebound in the second quarter, this should further support oil prices and the NOK via improved risk appetite. We 'roll' our NOK forecasts profile and now see EUR/NOK at 9.50 in 1M (previously 9.60), 9.50 in 3M (NYSE:MMM) (unchanged), 9.30 in 6M (9.40), and 9.30 in 12M (unchanged). The unchanged 3M tenor reflects the summer period, during which improved structural liquidity and lower FX market activity have been a NOK headwind historically. Meanwhile, on a 6M tenor, we still pencil in a further move lower for the overvalued EUR/NOK.
EUR/SEK. If the Riksbank comes across as hawkish at the April meeting, which we think it will, the SEK should be supported and a break below 10.40 and possibly a test of 10.20 could be on the cards. Moreover, we think that the market may have overestimated the negative SEK impact stemming from dividends. That said, a shabby domestic growth outlook, weak inflation pressures and a central bank that is expected to eventually give in on any hikes this year suggests that the downside potential in EUR/SEK is limited. Instead, we could see the krona coming under renewed selling pressure later this year when the market is starting to reprice the Riksbank. Based on the above, we lower our 1-3M targets to 10.35 (10.50) and 10.20 (10.40) but raise our 6-12M forecasts to 10.40 (10.30) and 10.50 (10.30), respectively.
EUR/DKK EUR/DKK peaked in December and early January and has traded lower since. It rose temporarily towards the 7.4660 level during the annual dividend season. We forecast EUR/DKK at 7.4610 in 1M, 7.4580 in 3M and 7.4550 in 6-12M.
EUR/USD. The ECB has introduced an easing risk premium on the euro, which could increase (i.e. negative for the cross) if the euro-zone outlook continues to falter. However, price action during the April ECB meeting suggests to us that the market is looking for more than promises before selling the euro from an already short position. We forecast EUR/USD at 1.12 in 1M and 1.13 in 3M, where we see a potential for euro area data to continue to disappoint and underperform other regions. On 6M and 12M, we stick to our forecasts of 1.15 and 1.17, as the China-led recovery along with a US-China trade deal should lend support to EUR/USD.
EUR/GBP. With a medium to long Brexit extension and no reason to believe PM May's deal will pass any time soon, we think it is difficult to see much further GBP strengthening near term. Hence, we have raised our GBP forecasts throughout the forecast horizon and look for EUR/GBP to remain range-bound at 0.85-0.87 in 1-3M. It is difficult to predict what will happen when we get closer to the new Brexit deadline in October, but as we think a further extension is likely, we expect the cross to remain at 0.85-0.87 also in 3-12M. We target the cross in the mid of this range across horizons, i.e. 0.86 in 1M and in 3M (previously 0.83), 0.86 in 6M (0.82), and 0.86 in 12M (0.83).
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