EUR/NOK. Once again, the NOK has weakened in the final months of the year. This time, the move was triggered by souring global risk appetite and falling oil prices. Meanwhile, we still expect the cross to move lower in 2019 on the relatively better growth outlook, valuation and Norges Bank (NB) continuing its hiking cycle. Indeed, at the December NB meeting, the central bank confirmed its intention to hike policy rates twice in 2019 with the next hike due in March; this is more than current market pricing. In addition, we think oil prices are set to move higher on both supply- and demand-related factors. We roll the front end of our forecast profile to 9.50 in 1M (from 9.60) but keep the profile unchanged at 9.40 in 3M (NYSE:MMM), 9.20 in 6M and 9.10 in 12M.
EUR/SEK. November inflation data pushed EUR/SEK higher while it lowered the probability of a December rate hike. We acknowledge this uncertainty, but stick to our call for a 25bp rate hike. If we are right and if the communication is not overly dovish, it should pull EUR/SEK towards and possibly below 10.20, with a test of the December low at 10.16 being feasible. However, the cyclical slowdown in Sweden is a headwind for the SEK and the Riksbank could become hesitant to commit to a hiking cycle as a result. If, contrary to our expectations, the Riksbank leaves rates unchanged this month, it could seriously question the hiking cycle altogether. In that case, EUR/SEK could very well rally towards 10.50 and establish a higher range than we pencil into our base scenario. That said, in our base case of (at least) one Riksbank hike near term, we see EUR/SEK at 10.10 in 1M and keep our forecast profile intact at 10.10 in 3M, 10.00 in 6M and 10.00 in 12M.
EUR/DKK. DKK is relatively more exposed to an escalation in 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 due to, in particular, 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, helps to explain the recent rise in EUR/DKK to the 7.4600 level. We expect the pair to trade around 7.4600 in 1M (revised up from 7.4550), 7.4550 in 3M (revised up from 7.4525) and 7.4550 -n 6-12M.
EUR/USD. Although the ECB has now formally ended its asset purchase programme, the December meeting made it clear that rate hikes are not imminent. Meanwhile, the Fed looks determined to get to 'neutral' on rates, which following the recent softer pricing of its cycle, leaves risks titled towards continued carry and cyclical support for the USD. We maintain the view that EUR/USD is caught in a range of around 1.13 near term, while we still believe ECB 'normalisation' and valuation are set to support the cross on a 6-12M horizon. We maintain our forecast profile and thus continue to see EUR/USD at 1.13 in 1M and 3M, 1.18 in 6M, and 1.25 in 12M.
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