EUR/NOK. Short-term risks remain skewed on the upside, as markets have priced out the probability of another Norges Bank rate cut in 2015 and as we approach year-end, when NOK liquidity tends to worsen. Importantly, 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. We leave our forecasts unchanged at 9.40 in 1M, 9.40 in 3M, 9.25 in 6M and 8.80 in 12M.
EUR/SEK: Focus is very much on the Riksbank December meeting and not least Governor Stefan Ingves's commitment to fight off SEK strength post further ECB easing. We expect a soft response (we look for another repo rate cut), which would send EUR/SEK higher. On balance, we continue to see 9.30-9.60 as a fair range and keep our 1-3M target at 9.40 intact. On a 6M and 12M horizon, we still forecast 9.30 and 9.00, respectively.
EUR/DKK: We have revised down our 1M forecast for EUR/DKK to 7.4550, from 7.4610, reflecting the expected negative impact on the cross of monetary easing from the ECB in December. We expect EUR/DKK to trade around 7.4550 on 3M-12M (unchanged from previously).
EUR/USD : We look for the Fed to hike and for the ECB to ease substantially in December and we have lowered our 1M and 3M forecasts as we believe the cross has further to fall on relative rates. We look for a temporary break below the March low at 1.0458 in December, forecasting EUR/USD at 1.04 in 1M (previously 1.10). We do not think the cross is headed for parity and we see little potential for the market to price sustained divergence in Fed-ECB policy beyond December and we target 1.06 in 3M (from 1.08). Longer term, we still expect to see a gradual move higher in the cross towards the levels warranted by medium- to long-term fundamentals. We keep our 6M and 12M forecast unchanged at 1.12 and 1.20, respectively.
USD/CNY: Given the divergence in monetary policy and that CNY is more market based, we look for a depreciation of the CNY of 4-5% over the next 12 months. In the short run, we expect the People's Bank of China to keep a tight grip on the CNY ahead of the IMF's decision on SDR. In light of the recent developments, we lift our 1M and 3M forecasts to 6.38 (from 6.37) and 6.45 (from 6.40), respectively, but leave our 6M and 12M forecasts unchanged.
EUR/GBP: We have lowered our 1M and 3M forecasts to 0.69 (from 0.74) and 0.68 (from 0.72), respectively, as we expect the ECB to ease substantially in December. We still expect the Bank of England to hike in February 2016. The market is pricing in the first full 25bp interest rate hike in November 2016, which is too dovish in our view given the strength of the economy and, not least, the labour market. Longer term, we expect the cross to stabilise and eventually move gradually higher, as we expect fiscal consolidation and political risks in the UK (EU referendum) to weigh on the GBP, while the euro, to a greater extent, should benefit from fundamentals next year. We keep our 6M and 12M forecasts unchanged at 0.71 and 0.73, respectively.
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