EUR/NOK. We maintain our near-term cautious view on the NOK as the global business cycle and commodities outlook does not favour the NOK even if Norges Bank is likely to turn 'cautiously hawkish' in June. On the other hand, we pencil in the EUR moving somewhat lower over the coming months as eurozone data weakens and European equities no longer attract unhedged equity flows. This should drag the cross lower. The Norwegian normalisation story, valuation and real rates remain clear NOK positives but the positive effects will likely be that of an H2 17/H1 18 story. We lift our EUR/NOK forecasts to 9.40 in 1M (from 9.30) but leave the rest of the profile unchanged.
EUR/SEK. Summer weeks typically mean lower liquidity in the SEK market. June is also typically a SEK-negative period.The main scheduled event risk is the Riksbank meeting on 4 July. We expect no changes with respect to rates, repo rate forecast and QE program, which should be relatively neutral for the SEK. We would not rule out a scrapping of the current 3bp easing bias though, given the inflation data and the ECB's recent move (potentially SEK positive). Our short-term models suggest that EUR/SEK is overbought but the timing to exploit that gap is difficult. In all, we raise the 1-3M forecast to 9.70 (9.60) and 9.60 (9.50) and keep 6-12M at 9.50 and 9.30 respectively.
EUR/DKK. Danmarks Nationalbank (DN) did not intervene in the FX market in May when EUR/DKK traded close to 7.44.After the French parliamentary election, which saw strong backing for Macron's party, EUR/DKK dropped to around 7.4350-60, a dip we view as temporary. We forecast EUR/DKK at 7.4400 on 1-12M.
EUR/USD. With the ECB set to be side-lined in coming months by a sustained deterioration in the inflation outlook, the euro should be vulnerable to a likely loss in cyclical momentum in the euro zone. A Fed determined to move on with policy normalisation should lend some support to USD near term, but we stress that the significant move to watch out for on a 12M horizon will likely be fuelled by an ECB shift away from further easing. Longer term, we thus continue to emphasise that fundamentals remain supportive. We still maintain that risks are to the downside near term and are merely rolling our longer-term forecasts to target the pair at 1.11 in 1M, 1.09 in 3M (unchanged), 1.12 in 6M (prev. 1.11) and 1.18 in 12M (prev. 1.16).
EUR/GBP. The UK election outcome was in many ways the worst possible for GBP, and we stress that sterling will likely stay in undervalued territory during Brexit talks but be highly sensitive to progress in discussions. We see EUR/GBP in the 0.84-0.90 range near term. While clarity on Brexit terms should brighten the skies for the pound, appreciation potential should be limited by notably a terms-of-trade deterioration. We now look for EUR/GBP to trade around 0.87 throughout our forecast horizon (prev. 0.84 in 1-3M and 0.83 in 6-12M), i.e. any appreciation pressure has been postponed.
USD/CNY. We revise lower our outlook for USD/CNY and now forecast the cross to be at 7.10 in 12M - a downward revision from 7.30. China has tightened the grip on USD/CNY and in combination with a weaker USD, the upward pressure on the cross has eased. EUR/CNY is still expected to move higher in tandem with EUR/USD.
USD/RUB. While the internal environment continues to be favourable for the RUB outlook, external risks are rising: downside pressure in the crude oil price and possible new anti-Russia sanctions by the US combined with China's slowdown risk are RUB negative in the short to medium term. Given increasing external risks to the RUB, we update the current RUB levels, expecting higher than previous levels in USD/RUB: 58.20 in 1M (previously 55.50), 59.40 in 3M (previously 54.40), 54.70 in 6M (previously 53.00) and 53.50 in 12M (previously 52.00).
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