EUR/NOK . Although the NOK is substantially undervalued from a long-term perspective, the short-term outlook continues to be tied closely to how the economy is doing, to oil price developments and to global risk sentiment. As we are very cautious on risk assets short term and as we see downside to short-term NOK rates on our call for a Norges Bank March cut, we think EUR/NOK risks are skewed on the upside in the coming month. We now forecast EUR/NOK at 9.70 in 1M (previously 9.60), 9.70 in 3M (9.60), 9.40 in 6M (9.30) and 9.10 in 12M (9.00).
EUR/SEK : Risk-off sentiment alongside the Riksbank's unprecedented and controversial preparedness to carry our FX intervention has weighed on the SEK. Fundamentals remain highly supportive though. This said, there is a risk that the prolonged period with positive data surprises will be reversed in the next few months. On balance, we raise our 1M target to 9.40 (from 9.30), keep our 3M forecast intact at 9.30 and raise 6M and 12M to 9.30 (from 9.20) and 9.10 (from 9.00), respectively.
EUR/DKK : We expect EUR/DKK to fall to 7.4550 on a 1M horizon and stay at this level on a 3-12M horizon (unchanged from last forecast update), mainly on the back of further ECB easing and in the near-term also due to a temporary lower net position.
EUR/USD : The cross is currently caught between potential downside from relative rates on the one hand and support from a range of other factors including valuations and current account differential on the other. We continue to see the cross range-bound, albeit at slightly higher levels after breaking out of the 1.05-1.10 interval. We have kept our 6-12M forecast profile unchanged and thus continue to see EUR/USD headed towards 1.16 in 12M but upped our 1-3M forecasts slightly, seeing a dip towards 1.08 (previously 1.06) in 3M.
USD/JPY : We expect the Bank of Japan (BoJ) to cut interest by 20bp in March and forecast a rise in USD/JPY to 115 in 1M (previously 118). however, in the short term, the BoJ might find it difficult to battle the appreciation pressure on the JPY with monetary easing as the currency remains supported by fundamental factors such as a rising current account surplus and stretched valuations. We forecast USD/JPY at 116 in 3M (previously 120). Longer term, we expect cyclical and monetary policy divergence (Fed hikes and BoJ rate cuts) to continue to support the case for a moderate increase in USD/JPY over the medium-term horizon. We forecast USD/JPY at 119 in 6-12M.
EUR/GBP : We have lifted our 1-3M EUR/GBP forecast due to the looming EU referendum. We now target EUR/GBP at 0.78 (previously 0.76) in 1M and 0.80 in 3M (previously 0.73) with the risks skewed towards further EUR/GBP upside going into a possible EU referendum in June or July. Longer term, the outlook for EUR/GBP very much depends on the outcome of the EU referendum. In our main scenario, we assume a status quo for the UK, meaning that people vote to remain in the EU. We target EUR/GBP at 0.74 in 6M (previously 0.71) and 0.73 in 12M (previously 0.75) but stress that these forecasts are subject to a significant digital risk.
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