On 26 March, we asked clients where they expected EUR/SEK, EUR/NOK and EUR/USD to be in three months (19 June). We also asked the following questions. (1) Will the Riksbank hike in 2018? (2) Will Norges Bank hike in 2018? (3) Will the ECB hike before 2020?
EUR/SEK? Clients have not given up on a recovery for the Swedish krona, although they expect it to stay above 10.00 in 3M. Consensus expects a 1.5% fall in 3M, down to 10.03. The rally in EUR/SEK over the past few months rhymes with clients becoming more doubtful about a hike this year (see below). However, they expect the krona to strengthen in a no-hike scenario and despite an arguably negative outlook for the housing market, 36% see it below 10.00 and only 6% expect it to reach 10.30 or higher. We forecast EUR/SEK at 10.30 in 3M.
EUR/NOK? Clients, who were correct in believing in a stronger NOK in our previous survey, continue to see EUR/NOK moving lower in Q2, although at a much slower pace than in Q1. Consensus is a 1.1% fall to 9.4510 in 3M, after a 3% fall YTD. The positive view on the NOK accompanies expectations that Norges Bank will hike later in 2018 but the predicted slowdown in the NOK rally may suggest the hike is to some extent already discounted. We forecast EUR/NOK at 9.40 in 3M, so we are slightly more bullish on NOK.
EUR/USD? Clients remain slightly bullish on the USD but have adjusted their estimates higher versus the previous survey. The median 3M forecast is 1.2275. Another way of looking at this is that clients, on average, expect the cross to move sideways within the recent 1.22-1.25 range. We (also) forecast EUR/USD at 1.23 in 3M.
ECB to hike before 2020? The ECB says it will not hike until well after the QE programme has ended. The market is pricing in the first hike in H1 19, which some ECB members have said is fair. A large majority of clients, 83% of the responses, expects a hike before 2020. We expect the first hike in Q2 19.
Riksbank hike 2018? The Riksbank predicts a first hike in Q3 18. Our clients disagree. In September 2017, 60% expected a hike before Q4 18. In December 2018, 46% expected a hike in 2018. This time, 35% see a hike before year-end 2018. This may help to explain why EUR/SEK has moved higher and why the projected SEK rebound is relatively modest. Contrary to previous surveys, Swedish clients have become more dovish on the Riksbank than non-Swedish clients. We still expect no hikes in 2018.
Norges Bank hike 2018? Expectations about Norges Bank are almost the mirror image of those on the Riksbank. Of respondents, 74% expect Norges Bank to hike before year-end 2018, which is what the central bank has clearly communicated. In September and December 2017, clients were almost evenly split as to whether or not there would be a hike (see chart). We expect a hike in Q3 18. Even though clients see a hike in Norway and no hike in Sweden, they expect NOK/SEK to move lower in 3M. We expect it to move higher.
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