EUR/NOK . Over the past month we have seen some of the NOK weakness that we have been calling for materialise. Recently the move has been amplified by risk-off and concerns about the Swedish housing market spreading to the NOK. In the near term, we expect the NOK to track risk sentiment which leaves the currency vulnerable to the weak side at a time of the year where liquidity tends to worsen. Meanwhile, for 2018 we still pencil in a moderately stronger NOK, not least on the back of a further reduction in spare capacity in the Norwegian economy and a currency supported inflationary outlook allowing for the first Norges Bank hike in Q4 18. Also valuation forces will remain a drag on the cross over the next year. We raise and roll our forecasts profile to 9.60 in 1M (from 9.40), 9.40 in 3M (9.50), 9.20 in 6M (unchanged) and 9.10 in 12M (unchanged).
EUR/SEK . The drastic deterioration of housing market sentiment has weighed heavily on the SEK over the past few weeks. We have repeatedly identified this as a key risk but it has not been the main scenario, so has not been reflected in our forecasts. Now it is materialising. The money market has so far been relatively resilient but there is a high probability that the Riksbank will have to adjust, sending the first rate hike further into the future. In our view, the SEK will continue to trade with a house risk premium and therefore we have raised our forecast profile to 10.10 (previously 9.60), 10.10 (previously 9.50), 9.80 (previously 9.40) and 9.70 (previously 9.30) in 1M, 3M, 6M and 12M, respectively. In the medium term, we pencil in a tentative normalisation due to stretched valuations.
EUR/DKK . We expect EUR/DKK to trade around 7.4425 on a 1-6M horizon. Next year, we look for some positive spill over from a higher EUR/USD and forecast the pair at 7.4450 on 12M (unchanged from last month). Following the uncertain outcome of recent political events in Europe, e.g. the German election and Catalan referendum, focus may turn to the Italian election due to be held in May next year at the latest.
EUR/USD . Dips in EUR/USD could occur near term as the risk of USD support from a US tax reform and the relative cyclical position and policy-cycle remain, and still look for the 1.1479-1.1880 range to hold towards year end. That said, we continue to stress that a 2018 rebound towards 1.25 is in the cards and that upside risks dominate the longer-term outlook. We now see the cross at 1.16 in 1M and 1.16 in 3M (previously 1.18). We keep our forecasts for the 12M horizon unchanged at 1.25 but lower the 6M forecast to 1.20 (previously 1.22) to reflect that the ECB has postponed the potential for 'normalisation' trades somewhat.
EUR/GBP . We have lifted our 1M and 3M forecast to 0.90 in 1M (0.88) and 0.89 in 3M (0.88) as weexpect relative rates, growth, UK politics and Brexit uncertainty to remain EUR/GBP positive. Overall, we still expect EUR/GBP to trade within the 0.8650-0.90 range in coming months with risks skewed to the upside and Brexit uncertainty remaining a source of volatility. Longer term, we still see potential for a decline in EUR/GBP driven by possible clarification on Brexit negotiations and valuations targeting 0.87 in 6M and 0.86 in 12M.
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