EUR/NOK. We expect relative rates to be a NOK negative in the coming month, as we anticipate Norges Bank to lower the sight deposit rate by 25bp on 24 September and signal a high probability of another rate cut. As a full cut has yet to be priced for the September meeting, relative rates will send the cross higher. We target the cross at 9.40 in 1M (unchanged) and 3M (previously 9.50). From most fundamental perspectives the NOK remains very cheap, which together with stretched speculative positioning should become a NOK positive when the business cycle turns, Norges Bank has finished cutting rates and the oil price moves higher. We still target the cross at 9.25 in 6M and 8.80 in 12M (both unchanged).
EUR/SEK: The krona is becoming a short-term headwind for the Riksbank. We see 9.30-9.60 as a fair range for the cross also for the next few months. We leave our forecast profile intact, targeting 9.40 in 1-3M, 9.30 in 6M and 9.00 in 12M.
EUR/DKK: We still forecast EUR/DKK to drop to 7.4550 on 3M-12M on the back of two unilateral rate hikes.
USD/CNY: We look for USD/CNY to be broadly flat in the short term ahead of the SDR review in November. However, we continue to look for a gradual depreciation in 2016 based on 1) currency allowed to be more market-based, 2) the Fed likely to hike rates while China set to continue with easing bias and 3) China's export sector is feeling a drag from further decline in EM growth outside China. However, we don't expect a big devaluation but rather a depreciation of around 5% in 12M to 6.70 against the USD. The CNH-CNY spread is expected to be kept close to zero, if necessary through intervention in the off-shore market.
EUR/USD: We maintain that EUR/USD is set to move lower on relative rates on a 3M horizon and roll our 1M forecasts to1.12 in 1M (previously 1.13). However, we emphasise that both Fed and ECB support to a lower EUR/USD could prove short-lived. Hence, we have left our 3-12M forecasts unchanged, maintaining that the cross should edge higher longer term as warranted by medium-term fundamentals, i.e. we continue to see the pair at 1.15 in 12M.
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