EUR/NOK. EUR/NOK has re-settled in the lower end of the 9.40-9.60 range following a turbulent period where fading NOK headwinds were countered by a dovish Norges Bank and tumbling risk sentiment. Going forward, we still expect EUR/NOK to move lower on valuation and that Norges Bank has indicated in its base case that it will out hike peers. In our view, market pricing of Norges Bank remains too soft but we are likely to have to wait for a significant repricing. With year-end creating an asymmetric balance of risk to foreign developments, this creates a tougher environment for EUR/NOK to break below the 9.40 threshold this side of the New Year. In light of December no longer being a live meeting for the next interest rate hike, we raise our 3M (NYSE:MMM) forecast profile. We now forecast EUR/NOK at 9.40 in 1M (unchanged), 9.40 in 3M (9.30), 9.20 in 6M (unchanged) and 9.10 in 12M (unchanged).
EUR/SEK. We have a 3M bullish view on the SEK based on the Riksbank delivering its first hike in seven years. Our 3M EUR/SEK target is 10.20 (unchanged ). Near term, we continue to see upside risks based on political events in Sweden and abroad. On the other hand, the Riksbank's October meeting could have the opposite effect. On balance, we merely roll the 1M forecast lower to 10.40 (10.50). Taking into account the latest batch of higher-than-expected inflation numbers and how these feed into the inflation forecast, one could argue that pricing is somewhat too dovish - more so when it comes to pricing further out. Hence, we opt to lower our 6M and 12M forecasts to 10.10 (10.20) and 10.10 (10.30), respectively.
EUR/DKK. DKK is relatively more exposed to an escalation of the global trade war, as the Danish economy is small and very open and has significant exposure to global shipping. Furthermore, Denmark has net exposure to the stock market, in particular due to the Danish Life and Pension (L&P) sector's large holdings of US and euro-area stocks. This, in addition to the easier DKK liquidity situation and negative FX forwards, could help to explain the recent rise in EUR/DKK to the 7.4600 level. We expect the pair to trade around 7.4550 on 1M, 7.4525 in 3M and 7.4550 on 6-12M horizons.
EUR/USD . The strong US economy will keep the Fed in the hiking game for now and add to the carry support to USD - notwithstanding recent Trump calls for slowing the tightening pace. Coupled with the risk of setbacks on Italy and Brexit negotiations, this should leave EUR/USD in a range around 1.15 on a 3M horizon. Medium term, the euro capital outflows of recent years will fade as the first ECB hike draws closer. Alongside valuation, this is set to support EUR/USD in 6-12M. We have kept our forecast profile unchanged and see EUR/USD at 1.15 in 1M, 1.15 in 3M, 1.18 in 6M, and 1.25 in 12M.
EUR/GBP. Brexit optimism has improved since the Conservative Party Congress ended on 3 October. We are still sceptical that the EU and the UK will reach a deal at the EU Summit in October, which leaves EUR/GBP risks tilted to the upside near term. We target 0.88 in 1M. Longer term, we still expect EUR/GBP to trade lower eventually, driven by Brexit clarifications and fundamental valuations. We target EUR/GBP at 0.84 in 3M and 0.83 in 6M and 12M.
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