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Danske Bank Update G10 FX Views

FOREX

Danske Bank note that they lower their “forecast on EUR/USD to $1.00 in 12 months as we see a coordinated tightening of global financial conditions, further cyclical weakening among trading partners, large negative terms-of-trade shock to Europe vs U.S. and broadening USD strength. We pencil in a further rise in EUR/NOK over the coming 3-6 months (to NOK10.50 & NOK10.40, respectively) on rising global recession risks but forecast a secular weakening trend amid the outlook for elevated inflation and commodity prices in the years ahead. In the near-term, we expect more Riksbank rate hikes to support SEK, but rising recession risk and an even stronger USD will prove to be a headwind in 6-12 months, forecasting a EUR/SEK move to 10.70 in 12 months. We raise our EUR/GBP forecast for 3-6 months (to GBP0.86 & GBP0.85, respectively) as relative rates now seem supportive for EUR relative to GBP. A key assumption behind our FX forecasts is that of a stronger USD and tightening of global financial conditions. Risks to this assumption include global inflation pressures fading fast, renewed focus on China easing, a global capex uptick and/or industrial production increasing, which could underpin a new reflation leg higher.”

MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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