EUR/SEK. The SEK has been hit by its attractive funding properties in a low-volatility environment, a deteriorated growth outlook and expectations that central banks will stay soft for longer. The latter two factors may be discounted already, while the carry argument could continue to weigh on the SEK. We think the Riksbank will keep the rate path intact at the April meeting, while lowering the inflation forecast - a hawkish signal, which should weigh on EUR/SEK. We expect the SEK to remain weak throughout our forecast horizon. We raise our 1M forecast to 10.50 (previously 10.40), keep 3M (NYSE:MMM) at 10.40 and lift our 6-12M estimates slightly to 10.30 (from 10.20). On balance, we believe the profile conveys a relatively neutral view on the EUR/SEK.
EUR/NOK. We think many of factors weighing on the NOK in February are now fading, leaving investor focus on the strong and relatively unique macro case in Norway: a closed output gap, inflation surprising positively from levels already above the central bank target and mainland growth accelerating despite weaker global impulses. We expect Norges Bank's rate hike on 21 March and its revised rate path to create renewed interest in the NOK from foreign investors, who have been net sellers recently. In addition, we expect the global environment gradually to improve, which should directly and indirectly via a higher oil price underpin the NOK. We still expect tighter structural liquidity and higher daily Norges Bank NOK purchases to support the NOK. We leave our NOK forecasts unchanged at 9.60, 9.50, 9.40 and 9.30 in 1M, 3M, 6M and 12M, respectively.
EUR/DKK peaked in December and early January and has headed lower since. The dividend season will continue until the start of April, which could give rise to some temporary EUR/DKK positive flows. We forecast EUR/DKK at 7.4590 in 1M, 7.4570 in 3M and 7.4550 in 6-12M.
EUR/USD. The ECB has introduced an easing risk premium on the EUR, which could increase if the eurozone outlook continues to falter. Further, with the risk of pockets of USD strength from renewed pricing of Fed hikes and a trade deal that will not provide much imminent support, this opens the possibility of a EUR/USD move towards 1.10 near term. Over the medium term, we expect EUR/USD to stabilise and move back into the longstanding 1.12-1.16 range, as the EUR easing discount is priced out; a drift higher this year would derive mainly from positive spillovers to the euro area from a turn in the global (China) cycle. In FX Strategy - ECB introduces 'easing risk premium' on EUR , 7 March, we updated and notably flattened our forecast profile and we see EUR/USD at 1.11 in 1M, 1.13 in 3M, 1.15 in 6M, and 1.17 in 12M. This is a marked change in our EUR/USD outlook and we emphasise that it should be seen as a EUR/USD rate that is effectively left without much of a trend this year.
EUR/GBP. With the likely extension of Brexit, we think EUR/GBP will remain in the 0.85-0.87 range for now. We see a risk investors will be disappointed about the progress near term, which could lead EUR/GBP to move to the higher end of the range again. We target 0.86 in 1M. Further out, we build our forecast on the baseline scenario that a deal will pass and that this could happen before the summer holiday, paving the way for a decline in EUR/GBP. We lower our targets to 0.83 in 3M and 0.82 in 6M on the back of the ECB's dovish policy shift (from 0.84 and 0.83, respectively).
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