Investing.com - Financial Markets Worldwide

Euro Support To Continue Several More Months‏

ByDanske Markets
Published 04/16/2013, 08:22 AM
Updated 05/14/2017, 06:45 AM

Except for the yen we have made very few major changes to our FX Forecasts compared to the view presented in FX Trends published on March 22. We stick to our overall view that the euro will gain against USD, JPY and GBP over the next three months and continue to forecast that EUR/USD will hit 1.33 and that the EUR/GBP will hit 0.88 on a 3M horizon. Given our new higher USD/JPY forecast, we expect EUR/JPY to trade as high as 136 (131) in three months' time.

Policy Effects
The combination of fiscal tightening and monetary easing is expected to weigh on JPY and GBP and we think there is further downside in store for both currencies. Thus, while the Bank of Japan's fundamental shift in monetary policy will continue to favour a weaker JPY (our 12M target has been raised from 108 to 110), there is in our view a considerable risk that the market underestimates the probability of further easing to be implemented by Bank of England. Hence, Sterling is a perfect storm in the making and we still target EUR/GBP at 0.90 in six months.

We keep our positive view on the Scandies and expect EUR/SEK to drop as low as 8.10 on a 6M horizon and EUR/NOK to 7.30(7.25) on a 12M horizon. However, we are a bit cautious about NOK on a 1M horizon as the risk of a new rate cut in May from Norges Bank should not be underestimated.

We have not made any major changes to our Emerging Markets FX forecasts either and we remain fairly upbeat across the EM universe. We would especially highlight our bullish call on the Mexican peso, which is supported by deep structural improvements in the Mexican economy as well as positive global risk sentiment.

To Read the Entire Report Please Click on the pdf File Below.

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