EUR/NOK. In light of the unexpected renewed collapse in the oil price we lift our EUR/NOK forecast across all tenors. We cannot rule out another rate cut from Norges Bank but importantly market pricing has already turned very dovish with 37bp worth of cuts priced in for the coming 12M. Relative fundamentals, positioning and models continue to suggest downside in EUR/NOK and we therefore still expect a stronger NOK eventually. We now target the cross at 9.10 in 1M (from 8.90), 8.90 in 3M (8.70), 8.70 in 6M (8.50) and 8.50 in 12M (8.40).
EUR/SEK. The Riksbank's rate cut and expanded QE programme in early July followed by downward pressure on energy prices and growing concerns about the global economic outlook set the uptrend for EUR/SEK this summer. However, last week's positive CPI surprise ignited a repricing of the Riksbank and sent EUR/SEK lower. The pair is now close to neutral in terms of our short-term financial models and in line with our one- to three-month target at 9.40, and we leave our forecasts unchanged. We see the pair within a 9.30-9.60 range for the next few months.
USD/CNY. The main implications of China's new exchange-rate policy are that the link to the USD has weakened and the exchange rate has become more dependent on growth and monetary policy in China. In our view, China is not aiming for a major competitive devaluation. However, relative monetary policy between China and the US suggests that the CNY will continue to depreciate and we expect it to depreciate by close to 5% against USD in the next 12M. In the short run however, we expect the PBoC to keep the CNY in a tight grip ahead of the IMF's decision on SDR this autumn. Hence, we only expect it to depreciate slightly on a 1M and 3M horizon.
EUR/USD. It is now the final call for USD strength: while we think the Fed will hike in September, we are in for a shallow hiking cycle and a pick-up in euro-zone inflation (despite the recent oil drop) limits EUR/USD downside later in the year. We have revised our 3M and 6M forecasts a little higher to 1.06 (prev. 1.04) and 1.08 (1.06), respectively. Further out, the cross should edge towards the higher levels warranted by fundamentals and we maintain a 12M forecast of 1.10.
USD/RUB. We expect the rouble's weakening to continue as the oil price remains feeble and Russia's monetary authorities have not intervened significantly in the free float. We raise our forecasts for USD/RUB to 70.00 (3M) from 64.00 and 72.00 (6M) from our previous forecast of 66.00. We keep our long-term forecast unchanged at 70.00 (12M).
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