The downward pressure on EUR/DKK has intensified following the ECB’s Mario Draghi’s Jackson Hole speech and further easing on 4 September. Hence, we are lowering our EUR/DKK forecasts to 7.4475 for 1M, 7.4475 for 3M, 7.4450 for 6M and 7.4450 for 12 months, from 7.4510 for one, three, six and 12 months previously. We continue to expect Danmark’s Nationalbank (DN) to lower the certificate of deposit (CD rate) by 10bp to minus 0.15% within the coming three months, which would cap DKK appreciation pressure.
The Scottish referendum on 18 September represents a significant short-term risk factor for GBP and, given current pricing, EUR/GBP is poised to move markedly after the referendum in either direction. We have kept our forecast unchanged at 0.78 in 3M, 0.77 in 6M and 0.76 in 12M but stress that a ‘yes’ on 18 September would most likely trigger an upward revision of our forecast. Nevertheless, we still expect EUR/GBP to continue to trade lower in the coming 12 months, driven primarily by divergent monetary policy, as we still believe the Bank of England (BoE) is on a very different path for monetary policy versus the ECB. This will hold even if the Scottish referendum comes out with a ‘yes’, although the downside potential in this scenario would be less than our current forecasts project.
We expect a considerable USD/JPY appreciation to play out over the coming three to six months, driven by portfolio outflows in the wake of a likely pension fund reform forcing the Japanese Government Pension Investment Fund (GPIF) to lower its holdings of Japanese government bonds. Last week, we raised our 1M, 3M and 6M USD/JPY forecasts to 107, 110 and 112, respectively, from 102, 105 and 110, respectively, previously. We maintain our 12M USD/JPY forecast at 114.
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