FX Forecast Update - Danske Analyse - Danske Bank
FX Forecast Update - Danske Analyse - Danske Bank
FX Forecast Update - Danske Analyse - Danske Bank
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<strong>FX</strong> <strong>Forecast</strong> <strong>Update</strong> 17 June 2013<br />
June: EM sell-off nearing an end<br />
Arne Lohmann Rasmussen<br />
Chief Analyst, Head of Rates, <strong>FX</strong> and Commodities Strategy<br />
Kasper Kirkegaard Stefan Mellin Stanislava Pravdová-Nielsen<br />
Senior Analyst Senior Analyst Analyst<br />
Morten Helt Lars Christensen Christin Tuxen Vladimir Miklashevsky<br />
Senior Analyst Chief Analyst Senior Analyst Analyst<br />
www.danskebank.com/research<br />
Bloomberg: DR<strong>FX</strong> <br />
Investment Research<br />
www.danskebank.com/CI<br />
Important disclosures and certifications are contained from page 33 of this report.
Main forecast changes<br />
• We still believe Q1 marked the peak in EUR/USD and that risk is now skewed towards a stronger US<br />
dollar as Fed tapering is expected to begin in H2 13. The exact timing of the Fed tapering and the<br />
subsequent pricing of rate hikes is still the key driver for EUR/USD. All in all, we expect the first cyclical<br />
move lower in EUR/USD (contrary to risk driven) in several years to take place on a six- to 12-month<br />
horizon. We target 1.26 (previously 1.27) on a 12M horizon.<br />
• We have seen a very sharp sell-off in the emerging market (EM) currencies over the past month. The selloff<br />
could continue in the near term, particularly in countries with domestic risks - such as Turkey - but<br />
fundamentally we are optimistic that the sell-off is nearing an end. First, the outlook for the global<br />
economy is fairly positive. Second, from a valuation perspective, a number of EM currencies now look<br />
fundamentally attractive. Third, the sell-off has pushed up EM rates and yields significantly, which means<br />
that carry is now significantly higher on the EM currencies than prior to the sell-off. We are therefore<br />
optimistic that the worst is behind us on the EM currencies and it is time to begin to look for<br />
opportunities in the EM <strong>FX</strong> universe.<br />
• We still expect the combination of fiscal tightening and aggressive monetary easing to weigh on the JPY<br />
and GBP. However, in respect of the GBP, the depreciation might be less pronounced than earlier expected<br />
as the room to manoeuvre for the incoming <strong>Bank</strong> of England (BoE) governor Mark Carney might be smaller<br />
as the UK economy has improved in Q2. We now target EUR/GBP at 0.87 (was 0.88) in six months. In<br />
respect of USD/JPY, we have revised the 3M forecast slightly lower to 101 (from 103). We keep our 110<br />
12M target unchanged. We have lowered our 3M forecast for EUR/CHF to 1.24 (was 1.26).<br />
• We have lowered the level of our AUD/USD forecast markedly following the sell-off over the past month:<br />
the Australian economy is struggling with an end to the mining boom and a still strong AUD, which<br />
contrasts with a decent US outlook, and we think the RBA and Fed are likely to respond accordingly. We<br />
also lower the NZD/USD level slightly but keep the USD/CAD profile unchanged. www.danskebank.com/CI 2
EUR/USD – likely to range trade through 2013<br />
• Growth. US outperformance is expected to continue<br />
but is likely to have peaked during Q1. Relative<br />
economic data surprises have become EUR/USD<br />
supportive recently.<br />
• Monetary policy. Relative monetary policy is clearly<br />
supporting EUR/USD upside but a potential reduction in<br />
the Fed’s monthly QE purchases could change this<br />
dynamic in the autumn.<br />
• Flows. The eurozone current account is improving fast,<br />
leaving external balances more currency positive than<br />
in the US.<br />
• Valuation. EUR/USD is trading at neutral levels<br />
according to long-term models (PPP estimate is 1.28).<br />
• Risks. Overall, risks remain skewed to the downside<br />
even as speculative investors are short EUR/USD.<br />
<strong>Forecast</strong>: 1.30 (3M), 1.27 (6M) and 1.26 (12M)<br />
1.50<br />
1.40<br />
1.30<br />
1.20<br />
EUR/USD<br />
1.10<br />
Jun-12 Sep-12 Jan-13 Apr-13 Jul-13 Oct-13 Feb-14 May-14<br />
75% conf. int. 50% conf.int. Forward <strong>Danske</strong> fcst Consensus fcst<br />
EUR/USD 1M 3M 6M 12M<br />
<strong>Forecast</strong> (pct'ile) 1.32 (30%) 1.30 (24%) 1.27 (19%) 1.26 (23%)<br />
Fwd. / Consensus 1.33 / 1.30 1.34 / 1.28 1.34 / 1.27 1.34 / 1.28<br />
50% confidence int. 1.31 / 1.36 1.30 / 1.37 1.29 / 1.39 1.27 / 1.42<br />
75% confidence int. 1.30 / 1.37 1.27 / 1.40 1.24 / 1.42 1.20 / 1.46<br />
Source: <strong>Danske</strong> <strong>Bank</strong> Markets<br />
• Conclusion. As the US recovery matures and a<br />
reduction in the Fed’s monthly asset purchases moves<br />
closer, support to the dollar should increase.<br />
We see strong arguments for continued range-trading<br />
through the end of 2013 and expect EUR/USD to top<br />
out below its Q1 1.37 peak.<br />
Kasper Kirkegaard, Senior Analyst, kaki@danskebank.com, +45 45 13 70 18<br />
www.danskebank.com/CI<br />
3
EUR/USD – important issues to watch<br />
• Euro rates expected to peak around current levels<br />
− As Yogi Berra famously said, it’s like déjà vu all<br />
over again. In January, the euro money market<br />
curve steepened sharply in anticipation of LTRO<br />
repayments and EUR/USD moved up to 1.37.<br />
Recent weeks have seen a similar steepening as<br />
excess liquidity approaches low levels and<br />
EUR/USD has moved higher again.<br />
− As the upper chart shows pricing is almost as<br />
stretched as in January. There is no reason to<br />
expect ECB rate hikes over the coming years and<br />
we expect upwards pressure on rates to fade,<br />
which in turn should see some of the support to<br />
EUR/USD fade.<br />
• European data surprise index has troughed<br />
− EUR/USD moved lower in the month following the<br />
trough in European economic surprises (late April)<br />
and has since moved higher – just like what<br />
typically happens. However, this also means that<br />
most of the potential support from this source has<br />
been exhausted.<br />
Kasper Kirkegaard, Senior Analyst, kaki@danskebank.com, +45 45 13 70 18<br />
European money market pricing is stretched<br />
Source: Reuters EcoWin, <strong>Danske</strong> <strong>Bank</strong> Markets<br />
EUR/USD around a trough in data surprises<br />
110.0<br />
108.0<br />
106.0<br />
104.0<br />
102.0<br />
100.0<br />
98.0<br />
96.0<br />
94.0<br />
92.0<br />
90.0<br />
Median (2006 - )<br />
Max-Min range<br />
Last two episodes (avg.)<br />
Current<br />
Source: Reuters EcoWin, <strong>Danske</strong> <strong>Bank</strong> Markets<br />
www.danskebank.com/CI<br />
4
EUR/GBP – risk of less ‘less monetary activism’<br />
• Growth. The Q1 GDP number increased 0.3% q/q and a<br />
'triple dip recession' was avoided. On top of this, the<br />
May PMIs continued to improve and they are now all<br />
above 50. It might be too early to declare a sustainable<br />
recovery but the UK numbers have definitely improved<br />
this spring.<br />
• Monetary policy. We expect incoming governor Mark<br />
Carney to introduce explicit guidance on rates and<br />
perhaps introduce some sort of threshold like the Fed<br />
did last year. However, given the stronger UK numbers,<br />
we should not expect additional monetary easing to<br />
begin with. We will probably have to wait for the<br />
publication of the August Inflation Report for specific<br />
changes. However, all in all we now believe Mark Carney<br />
will deliver less 'monetary activism' than previously<br />
expected.<br />
• Flows. A less dovish Carney could fuel inflow into GBP.<br />
• Valuation. From a long-term perspective, sterling is still<br />
clearly undervalued (PPP around 0.77).<br />
• Risks. The improvement in UK numbers makes it more<br />
difficult for Carney to change UK monetary policy<br />
materially. The LTRO-induced move higher in EUR<br />
money market rates could also push EUR/GBP lower.<br />
Arne Lohmann Rasmussen, Chief Analyst, arr@danskebank.dk, +45 45 12 85 32<br />
<strong>Forecast</strong>: 0.86 (3M), 0.87 (6M) and 0.84 (12M)<br />
0.95<br />
0.90<br />
0.85<br />
0.80<br />
EUR/GBP<br />
0.75<br />
Jun-12 Sep-12 Jan-13 Apr-13 Jul-13 Oct-13 Feb-14 May-14<br />
75% conf. int. 50% conf.int. Forward <strong>Danske</strong> fcst Consensus fcst<br />
EUR/GBP 1M 3M 6M 12M<br />
<strong>Forecast</strong> (pct'ile) 0.85 (53%) 0.86 (66%) 0.87 (71%) 0.84 (43%)<br />
Fwd. / Consensus 0.85 / 0.85 0.85 / 0.85 0.85 / 0.85 0.85 / 0.84<br />
50% confidence int. 0.84 / 0.86 0.83 / 0.87 0.82 / 0.87 0.81 / 0.89<br />
75% confidence int. 0.83 / 0.87 0.82 / 0.88 0.80 / 0.90 0.78 / 0.92<br />
Source: <strong>Danske</strong> <strong>Bank</strong> Markets<br />
Conclusion. We expect the combination of high inflation,<br />
fiscal tightening and focus on monetary easing to weigh<br />
slightly on GBP over the next six months. However, we<br />
now expect less GBP weakness than previously, as we<br />
expect Mark Carney to deliver less 'monetary activism'<br />
than previously expected due to the stronger UK<br />
numbers.<br />
On a 12-month horizon, we expect the GBP to strengthen<br />
slightly in line with our EUR/USD forecast and as UK<br />
growth stabilises.<br />
www.danskebank.com/CI<br />
5
EUR/GBP – important issues to watch<br />
• New remit still gives Carney room to manoeuvre<br />
− The new BoE remit keeps the primacy of inflation<br />
targeting. However, Chancellor George Osborne<br />
certainly gives the <strong>Bank</strong> of England (BoE) leeway to<br />
conduct ‘monetary activism’. The BoE can now do as<br />
the Fed and adopt ‘intermediate thresholds’, i.e. targets<br />
for growth/employment and inflation – a de facto dual<br />
mandate. It is also granted the right to use new policy<br />
instruments including those deployed by other central<br />
banks in recent years. Hence, open-ended easing and<br />
forward guidance as seen in the US now look likely.<br />
• What if UK numbers continue to improve<br />
− There is a growing probability that a global healing and<br />
better UK numbers will result in the market losing faith<br />
in Carney actually being able to change anything.<br />
Hence, the recent sterling appreciation might have<br />
further to run, especially if expectations regarding a<br />
deposit cut in the eurozone gain traction.<br />
• Relative monetary policy and EUR/GBP<br />
− If the ECB introduced negative deposit rates, relative<br />
monetary policy would turn in favour of the GBP.<br />
Negative deposit rates is not an option in the UK.<br />
UK numbers have improved, PMIs (diff. Index)<br />
Source: Reuters EcoWin, <strong>Danske</strong> <strong>Bank</strong> Markets<br />
GBP still remains ‘fundamentally’ undervalued.<br />
1.00<br />
1.00<br />
0.95<br />
0.95<br />
0.90<br />
0.90<br />
0.85<br />
0.85<br />
0.80<br />
EUR/GBP spot<br />
PPP estimate<br />
0.80<br />
0.75<br />
0.75<br />
0.70<br />
0.70<br />
0.65<br />
0.65<br />
0.60<br />
0.60<br />
0.55<br />
0.55<br />
0.50<br />
0.50<br />
0.45<br />
0.45<br />
86 88 90 92 94 96 98 00 02 04 06 08 10 12<br />
Arne Lohmann Rasmussen, Chief Analyst, arr@danskebank.dk, +45 45 12 85 32<br />
Source: Reuters EcoWin, <strong>Danske</strong> <strong>Bank</strong> Markets<br />
www.danskebank.com/CI<br />
6
USD/JPY – likely to range trade just above 100<br />
• Macro outlook: Japan’s real economy accelerated<br />
markedly in Q1 to 4.1% q/q AR from 1.2% q/q AR in<br />
Q4 12. The data released so far for April and May<br />
suggests that GDP growth might ease slightly to<br />
around 3.0% in Q2 but all in all it still looks like a<br />
relatively strong recovery in Japan. Deflation is easing,<br />
but inflation remains substantially below the 2%<br />
inflation target.<br />
• Monetary policy: <strong>Bank</strong> of Japan (BoJ) made no<br />
changes to its policy in connection with the 10-11<br />
June meeting. It was somewhat of a disappointment<br />
that BoJ did not announce any new measures to stem<br />
the relatively high volatility in Japanese bond markets.<br />
However, Kuroda kept the door open for an increase in<br />
the maturity of the fixed rate operation and BoJ is still<br />
easing aggressively by injecting massive amounts of<br />
liquidity into the economy.<br />
• Valuation: PPP estimate around 86.<br />
• Risk: Markets remain speculatively short JPY and<br />
while positioning has eased recently, USD/JPY could<br />
drop further if investors continue to scale down their<br />
short positions. However, we expect the BoJ to react if<br />
momentum in JPY appreciation picks up again or if<br />
volatility continues to rise.<br />
Morten Helt, Senior Analyst, mohel@danskebank.com, +45 45 12 85 18<br />
<strong>Forecast</strong>: 101 (3M), 105 (6M) and 110 (12M)<br />
110.0<br />
USD/JPY<br />
105.0<br />
100.0<br />
95.0<br />
90.0<br />
85.0<br />
80.0<br />
75.0<br />
Jun-12 Sep-12 Jan-13 Apr-13 Jul-13 Oct-13 Feb-14 May-14<br />
75% conf. int. 50% conf.int. Forward <strong>Danske</strong> fcst Consensus fcst<br />
USD/JPY 1M 3M 6M 12M<br />
<strong>Forecast</strong> (pct'ile) 98.00 (77%) 101.00 (82%) 105.00 (88%) 110.00 (89%)<br />
Fwd. / Consensus 94.91 / 101.37 94.91 / 102.72 94.91 / 104.70 94.91 / 104.36<br />
50% confidence int. 92.15 / 97.67 90.75 / 99.07 89.34 / 100.33 87.40 / 101.93<br />
75% confidence int. 89.81 / 99.82 86.99 / 102.43 84.52 / 104.70 80.56 / 107.93<br />
Source: <strong>Danske</strong> <strong>Bank</strong> Markets<br />
Conclusion: BoJ’s fundamental shift in monetary policy<br />
will continue to favour a weaker JPY. USD/JPY has<br />
dropped nearly 10 big figures over the past three weeks<br />
but the sell-off looks increasingly stretched and we<br />
expect USD/JPY to correct higher and trade at 98 in one<br />
month’s time. With the Fed poised to scale down its QE<br />
programme, relative monetary policy should continue to<br />
favour a weaker JPY. We target USD/JPY at 105 and<br />
110 in 6M and 12M, respectively.<br />
www.danskebank.com/CI<br />
7
USD/JPY – important issues to watch<br />
• Growth concerns from rising yields misplaced<br />
− Yields on long-dated JGB bonds have risen significantly since<br />
the BoJ announcement on 4 April but the fear of a possible<br />
negative impact on growth from higher bond yields is, in our<br />
view, misplaced. The 10-year bond is basically just back to its<br />
level of mid-2012 and in the meantime 5year-5year B/E<br />
inflation has increased about 1pp. In other words, expected<br />
real interest rates have dropped markedly and are now<br />
negative. Hence, we do not find the argument that the recent<br />
increase in government bond yields endangers the recovery<br />
convincing. Actually, targeting lower bond yields would be<br />
inconsistent with its goal of raising inflation expectations.<br />
• USD/JPY volatility in highest levels since 2009<br />
− Volatility in the Japanese bond market and in JPY crosses has<br />
increased markedly and USD/JPY implied volatility currently<br />
trades at the highest levels since 2009. Some of the increase<br />
in volatility has been driven by a general risk-off sentiment and<br />
in particular the sell-off in Japanese equities should be seen in<br />
perspective as Nikkei is still up more than 40% since the<br />
beginning of October 2012.<br />
− So far BoJ seems confident that financial markets will calm as<br />
the economy recovers. However, if BoJ does not manage to<br />
tame market volatility, there is a risk that it eventually could<br />
lead to a loss of confidence in 'Abenomics'.<br />
Morten Helt, Senior Analyst, mohel@danskebank.com, +45 45 12 85 18<br />
10Y JGB yields have risen significantly<br />
1.50<br />
%<br />
% 1.50<br />
1.25<br />
10-yearJGB yield<br />
1.25<br />
1.00<br />
1.00<br />
0.75<br />
0.75<br />
0.50 Inflation expectations, forward 5Y5Y<br />
0.50<br />
0.25 (from inflation-swaps)<br />
0.25<br />
0.00<br />
0.00<br />
-0.25<br />
-0.25<br />
-0.50<br />
-0.50<br />
11 12 13<br />
Source: Reuters EcoWin, <strong>Danske</strong> <strong>Bank</strong> Markets<br />
Market volatility has increased significantly<br />
120<br />
45<br />
><br />
80<br />
30<br />
25<br />
60<br />
20<br />
40<br />
15<br />
10<br />
20<br />
5<br />
0<br />
0<br />
2006 2007 2008 2009 2010 2011 2012 2013<br />
Source: Reuters EcoWin, <strong>Danske</strong> <strong>Bank</strong> Markets<br />
www.danskebank.com/CI 8
EUR/CHF – range bound<br />
• Growth. Growth is slowing in Switzerland, which is,<br />
however, still outperforming the eurozone.<br />
• Monetary policy. The SNB left monetary policy<br />
unchanged at its March meeting and pledged to<br />
continue defending the 1.20 minimum target.<br />
• Flows. Underlying flows (current account surplus)<br />
remain CHF supportive.<br />
• Valuation. The Swiss franc is overvalued by about 8%<br />
according to the <strong>Danske</strong> <strong>Bank</strong> General PPP model.<br />
However, the large inflation differential means that fair<br />
value in EUR/CHF is moving slowly lower every day.<br />
• Risks. When the SNB judges deflation risks to be<br />
history, a move back to a free-floating currency should<br />
be expected. However, this policy shift is, in our view,<br />
unlikely to take place in coming quarters – and likely<br />
not even within our forecast horizon.<br />
<strong>Forecast</strong>: 1.24 (3M), 1.24(6M) and 1.24 (12M)<br />
1.30<br />
1.25<br />
1.20<br />
EUR/CHF<br />
1.15<br />
Jun-12 Sep-12 Jan-13 Apr-13 Jul-13 Oct-13 Feb-14 May-14<br />
75% conf. int. 50% conf.int. Forward <strong>Danske</strong> fcst Consensus fcst<br />
EUR/CHF 1M 3M 6M 12M<br />
<strong>Forecast</strong> (pct'ile) 1.24 (72%) 1.24 (70%) 1.24 (68%) 1.24 (64%)<br />
Fwd. / Consensus 1.23 / 1.23 1.23 / 1.25 1.23 / 1.26 1.23 / 1.27<br />
50% confidence int. 1.21 / 1.24 1.20 / 1.25 1.20 / 1.25 1.19 / 1.26<br />
75% confidence int. 1.20 / 1.26 1.19 / 1.27 1.18 / 1.28 1.16 / 1.29<br />
Source: <strong>Danske</strong> <strong>Bank</strong> Markets<br />
• Conclusion. Buying interest has emerged every<br />
time EUR/CHF has approached the 1.20 minimum<br />
target – leaving EUR/CHF range-bound but around<br />
1.23.<br />
We do not see any triggers of a trend in EUR/CHF,<br />
but given the reduced euro tail-risks, potential<br />
remains for temporary spikes in EUR/CHF – not<br />
least if the JPY weakens again.<br />
Kasper Kirkegaard, Senior Analyst, kaki@danskebank.com, +45 45 13 70 18<br />
www.danskebank.com/CI<br />
9
EUR/CHF – important issues to watch<br />
• This is not a currency peg<br />
− SNB’s minimum target on EUR/CHF is technically no<br />
different from the interventions it conducted from<br />
March 2009 to mid-2010, although this time the SNB<br />
has announced the level that it will defend. It is<br />
important to note that this is not a currency peg in the<br />
traditional sense. The SNB has not expressed any view<br />
on how long it intends to keep the exchange rate floor in<br />
place, or as to whether it intends to move the target.<br />
• Correlation with yen depreciation flows<br />
− The correlation between the yen and the franc has<br />
been positive and fairly high since the introduction of<br />
Abenomics in Japan. In other words, some of the<br />
flows driving the yen weaker appear to be correlated<br />
with the flows that have recently weakened the franc.<br />
− Hence, any policy responses in Japan that fuels<br />
renewed JPY selling should have the potential to<br />
send EUR/CHF higher.<br />
Correlation remains with the yen<br />
-0.1<br />
Jan<br />
Source: Bloomberg, <strong>Danske</strong> <strong>Bank</strong> Markets<br />
CHF becoming less overvalued by the day<br />
2.0<br />
1.9<br />
1.8<br />
1.7<br />
1.6<br />
1.5<br />
1.4<br />
1.3<br />
1.2<br />
0.8<br />
0.7<br />
0.6<br />
0.5<br />
0.4<br />
0.3<br />
0.2<br />
0.1<br />
0.0<br />
JPY - CHF correlation (50-day window)<br />
Mar May Jul Sep Nov Jan<br />
12<br />
PPP estimate<br />
1.1<br />
90 92 94 96 98 00 02 04 06 08 10 12<br />
Source: Reuters EcoWin, <strong>Danske</strong> <strong>Bank</strong> Markets<br />
Mar<br />
13<br />
EUR/CHF spot<br />
May<br />
0.8<br />
0.7<br />
0.6<br />
0.5<br />
0.4<br />
0.3<br />
0.2<br />
0.1<br />
0.0<br />
-0.1<br />
2.0<br />
1.9<br />
1.8<br />
1.7<br />
1.6<br />
1.5<br />
1.4<br />
1.3<br />
1.2<br />
1.1<br />
Kasper Kirkegaard, Senior Analyst, kaki@danskebank.com, +45 45 13 70 18<br />
www.danskebank.com/CI<br />
10
EUR/SEK – the Riksbank will set summer mode<br />
• Growth. Q1 GDP surprised on the upside by printing<br />
1.7% y/y, a hair’s breadth higher than the Riksbank<br />
forecast. Activity indicators for Q2 suggest the recovery<br />
will continue in Q2. Sweden looks set to continue to<br />
outperform Euroland.<br />
• Monetary policy. Relative monetary policy is clearly<br />
supporting the downside in EUR/SEK. Our short-term<br />
spread model indicates that the pair is ‘overbought’ and<br />
even more so when the market, which currently has a<br />
bias for additional rate cuts, realises that 1% will mark<br />
the trough in this rate cycle. Rate hikes will not be on the<br />
agenda before 2014 but will still be more frontloaded<br />
than with the ECB.<br />
• Fundamentals. The fundamental backdrop, productivity<br />
growth, current account, relative inflation and public<br />
finances are all SEK-supportive factors.<br />
• Flows. High quality and commercial flows are likely to cap<br />
the upside in SEK crosses.<br />
• Valuation. The SEK is not fundamentally overvalued;<br />
EUR/SEK is either close to or above long-term equilibrium.<br />
• Risks. Higher: July cut or verbal interventions. Lower:<br />
Renewed euro crisis or a Nordea privatisation.<br />
<strong>Forecast</strong>: 8.40 (3M), 8.30 (6M) and 8.20 (12M)<br />
9.50<br />
9.25<br />
9.00<br />
8.75<br />
8.50<br />
8.25<br />
EUR/SEK<br />
8.00<br />
Jun-12 Sep-12 Jan-13 Apr-13 Jul-13 Oct-13 Feb-14 May-14<br />
75% conf. int. 50% conf.int. Forward <strong>Danske</strong> fcst Consensus fcst<br />
EUR/SEK 1M 3M 6M 12M<br />
<strong>Forecast</strong> (pct'ile) 8.50 (27%) 8.40 (22%) 8.30 (20%) 8.20 (19%)<br />
Fwd. / Consensus 8.61 / 8.48 8.62 / 8.49 8.64 / 8.43 8.69 / 8.43<br />
50% confidence int. 8.49 / 8.71 8.42 / 8.79 8.37 / 8.87 8.30 / 8.99<br />
75% confidence int. 8.40 / 8.81 8.28 / 8.95 8.17 / 9.09 8.01 / 9.31<br />
Source: <strong>Danske</strong> <strong>Bank</strong> Markets<br />
Conclusion. Last month we cautioned against<br />
near-term data-related headwinds for the SEK,<br />
expecting EUR/SEK to hover around 8.60 before<br />
heading lower on the back of relative monetary<br />
policy where the Riksbank would refrain from<br />
cutting rates in July. Indeed, the krona has had a few<br />
challenging weeks. However, basically nothing has<br />
changed for the worse. Hence, we continue to look<br />
for medium-term appreciation, leaving the 3-12M<br />
forecasts intact.<br />
Stefan Mellin, Senior Analyst , mell@danskebank.com +46 8 568 805 92<br />
www.danskebank.com/CI<br />
11
EUR/SEK – important issues to watch<br />
We expect the Riksbank will leave rates unchanged on 3 July<br />
• The market is pricing in a premium for a rate cut in July which<br />
might seem fair given the uncertainty about what will be in<br />
focus for the Riksbank Board this time. Is it low inflation, high<br />
unemployment, the krona or household debt and how to<br />
internalise macroprudential considerations Or is it inflation<br />
expectations Two new Board members add to uncertainty.<br />
• The data have been mixed but on balance close to Riksbank<br />
forecast (GDP growth, inflation and unemployment). The krona<br />
is significantly weaker. And there is no evidence what so ever<br />
that the majority camp abandoned its 'lean against the wind<br />
policy stance'; quite the opposite as suggested by a recent<br />
speech by Per Jansson.<br />
• Neither of the arguments above seem to favour a rate cut in<br />
our view. If we are right a re-pricing of the Riksbank would lend<br />
support to the downside in EUR/SEK.<br />
Nordea privatisation still on the radar<br />
• The government stake in Nordea <strong>Bank</strong> is 13.6%. If it decides<br />
to sell its share, worth around SEK40bn, this might, depending<br />
on the buyer, be a positive flow factor for the SEK.<br />
Relative rates key driver for EUR/SEK<br />
-0,6<br />
-0,7<br />
-0,8<br />
-0,9<br />
-1,0<br />
-1,1<br />
-1,2<br />
-1,3<br />
jun aug okt dec<br />
12<br />
Source: Reuters EcoWin<br />
Important rate decisions from NB and RB<br />
jun<br />
Source: Reuters EcoWin<br />
><br />
feb apr jun<br />
13<br />
0,85<br />
0,75<br />
0,65<br />
0,55<br />
0,95 ><br />
0,45<br />
feb apr jun<br />
13<br />
8,9<br />
8,8<br />
8,7<br />
8,6<br />
8,5<br />
8,4<br />
8,3<br />
8,2<br />
8,1<br />
1,19<br />
1,18<br />
1,17<br />
1,16<br />
1,15<br />
1,14<br />
1,13<br />
1,12<br />
1,11<br />
1,10<br />
Stefan Mellin, Senior Analyst , mell@danskebank.com +46 8 568 805 92<br />
www.danskebank.com/CI<br />
12
EUR/NOK – edging lower despite Norges <strong>Bank</strong> being on alert<br />
• Growth. Mainland GDP growth recovered in Q1 and<br />
the positive numbers continued in the spring with<br />
manufacturing production and credit growth rising<br />
briskly. The numbers indicate that Q4 was a<br />
‘temporary soft patch’. However, note that the recent<br />
'regional network report' has painted a less upbeat<br />
picture and the LFS unemployment rate is up.<br />
• Monetary policy. Due to low inflation and a moderate<br />
wage agreement, Norges <strong>Bank</strong> lowered its rate path<br />
significantly in March. However, Norges <strong>Bank</strong> left<br />
rates unchanged in May due to the weaker NOK. With<br />
our forecasts for growth, inflation and the NOK, we<br />
expect Norges <strong>Bank</strong> to be on hold for the rest of 2013.<br />
Risk is skewed towards a rate hike in 2014.<br />
• Flows. Norges <strong>Bank</strong> is currently purchasing a very<br />
modest amount of foreign currency. We have also seen<br />
less foreign interest for NGBs this year. Note that<br />
according to the weekly flow data speculators have<br />
strongly scaled down long NOK positions this year.<br />
• Valuation. The NOK is still slightly overvalued, with<br />
EUR/NOK PPP at 7.79.<br />
• Risks. Norges <strong>Bank</strong> cutting rates due to low inflation.<br />
Arne Lohmann Rasmussen, Chief Analyst, arr@danskebank.com, +45 45 12 85 32<br />
<strong>Forecast</strong>: 7.45 (3M), 7.40 (6M) and 7.35 (12M)<br />
8.50<br />
8.25<br />
8.00<br />
7.75<br />
7.50<br />
7.25<br />
7.00<br />
Jun-12 Sep-12 Jan-13 Apr-13 Jul-13 Oct-13 Feb-14 May-14<br />
EUR/NOK 1M 3M 6M 12M<br />
<strong>Forecast</strong> (pct'ile) 7.50 (17%) 7.45 (19%) 7.40 (20%) 7.35 (21%)<br />
Fwd. / Consensus 7.63 / 7.50 7.65 / 7.48 7.68 / 7.43 7.74 / 7.34<br />
50% confidence int. 7.54 / 7.73 7.49 / 7.80 7.45 / 7.88 7.41 / 8.01<br />
75% confidence int. 7.46 / 7.80 7.38 / 7.92 7.29 / 8.06 7.17 / 8.25<br />
Source: <strong>Danske</strong> <strong>Bank</strong> Markets<br />
EUR/NOK<br />
75% conf. int. 50% conf.int. Forward <strong>Danske</strong> fcst Consensus fcst<br />
Conclusion. We expect EUR/NOK to edge lower as a<br />
rate cut now looks less likely. However, Norges <strong>Bank</strong> is<br />
still focused on the currency and it is likely that the<br />
central bank will from time to time try to intervene<br />
verbally in the <strong>FX</strong> market, as EUR/NOK edges lower<br />
over the next 12 months. Note that our forecasts are<br />
based on the USD, GBP and SEK appreciating on a<br />
broad base (6 to 12 months), so the trade-weighted<br />
NOK does not become ‘too strong’ for Norges <strong>Bank</strong>.<br />
www.danskebank.com/CI<br />
13
EUR/NOK – important issues to watch<br />
• Weak Regional Network Report from Norges <strong>Bank</strong><br />
Recently, we have seen some positive surprises in Norway.<br />
Manufacturing production came in at 5.4% in May, credit<br />
growth increased to 6.5% driven by loans to households<br />
and underlying inflation surprised on the upside in both<br />
April and May. The positive development is reflected in the<br />
so-called surprise index that is at the highest level since<br />
June 2012. However, note the much less upbeat picture in<br />
the ‘Regional Network Report' pointing to weaker growth in<br />
Q2. Hence, there is a risk of a correction lower in the<br />
Norwegian surprise index ,which could weigh on the NOK.<br />
• Norges <strong>Bank</strong> meeting on 20 June in focus<br />
The Norges <strong>Bank</strong> meeting and the new inflation report due<br />
on 20 June are the No. 1 key events in Norway this<br />
summer. We expect no rate change but the rate path<br />
might be lifted slightly this year, indicating less chance of a<br />
new rate cut. Higher inflation, a weaker NOK and higher<br />
rates internationally all point in that direction. These<br />
factors should mitigate the weaker growth outlook implied<br />
by the Regional Network and the more moderate wage<br />
agreement. The question is whether Norges <strong>Bank</strong> will<br />
remove the probability of a rate cut this year.<br />
Norway: risk of correction lower in surprise index<br />
Source: Bloomberg, Macrobond<br />
High inflation in April/May makes a rate cut unlikely<br />
3.5<br />
%, y/y<br />
3.0<br />
2.5<br />
2.0<br />
1.5<br />
1.0<br />
0.5<br />
CPI-ATE (core inflation)<br />
0.0<br />
0.0<br />
00 01 02 03 04 05 06 07 08 09 10 11 12 13<br />
Source: Reuters EcoWin, <strong>Danske</strong> <strong>Bank</strong> Markets<br />
3.5<br />
3.0<br />
2.5<br />
2.0<br />
1.5<br />
1.0<br />
0.5<br />
Arne Lohmann Rasmussen, Chief Analyst, arr@danskebank.com, +45 45 12 85 32<br />
www.danskebank.com/CI<br />
14
EUR/DKK – no repeat of January<br />
• Since Danmarks Nationalbank (DN) hiked interest<br />
rates on 24 January, EUR/DKK has been relatively<br />
stable below the central rate and DN has not needed<br />
to intervene in the <strong>FX</strong> markets to support DKK. Hence,<br />
given that we expect the ECB to remain on hold, we do<br />
not expect any immediate rate changes from DN. We<br />
still expect one 10bp rate increase on a 12-month<br />
horizon, which would leave the lending rate at 0.30%<br />
and return the rate on certificates of deposit to zero.<br />
• If the ECB decides to cut the refinancing rate by a<br />
further 25bp, we expect DN to go along and cut the<br />
lending rate by 10bp to 0.10%. Should the ECB decide<br />
to cut the deposit rate into negative territory, we<br />
expect DN to track the move fully and lower the rate<br />
on certificates of deposit, respectively.<br />
• Following the ECB rate cut on 2 May, EUR/DKK<br />
moved marginally lower despite the strong<br />
performance for peripheral bonds and a weaker Swiss<br />
franc. The slightly stronger DKK might reflect that<br />
some market participants were surprised that DN<br />
slashed the lending rate by only 10bp. More recently,<br />
EUR/DKK has again moved higher. This time the move<br />
probably reflects the higher EONIA rates that<br />
triggered an independent rate hike in January.<br />
Arne Lohmann Rasmussen, Chief Analyst, arr@danskebank.dk, +45 45 12 85 32<br />
<strong>Forecast</strong>: 7.46 (3M), 7.46 (6M) and 7.46 (12M)<br />
7.465<br />
7.460<br />
7.455<br />
7.450<br />
7.445<br />
7.440<br />
7.435<br />
7.430<br />
Central parity<br />
EURDKK<br />
07 08 09 10 11 12 13<br />
EUR/DKK Spot 7.46038<br />
Source: Reuters EcoWin, <strong>Danske</strong> <strong>Bank</strong> Markets<br />
Conclusion. EUR/DKK is trading below central parity<br />
following continued strong demand for Danish bonds<br />
this year and after the ‘small’ DN rate hike in<br />
January. However, we do not expect to see strong<br />
new inflow into DKK in 2013 and a ‘strong move’<br />
below 7.46 as in 2012 is not expected. Also, we do<br />
not expect to see a new depreciation trend for DKK,<br />
as it will be firmly offset by DN through intervention<br />
and rate hike(s). Hence, we expect a very stable<br />
EUR/DKK over the next 12 months. If EONIA rates<br />
continue to move higher – contrary to our<br />
expectations it might push EUR/DKK higher like in<br />
did in January.<br />
www.danskebank.com/CI<br />
15
EUR/DKK forwards – forward discount very stable<br />
• The 12M forward discount in EUR/DKK widened in<br />
March as the market priced out the independent<br />
Danish rate hikes that were priced in in January.<br />
Hence, the normalisation of the EUR/DKK forward<br />
curve that we saw in January has now reversed<br />
slightly and the forwards have been very stable over<br />
the past two months. We primarily recommend<br />
hedging with short tenors and awaiting a further<br />
normalisation before largely using long tenors again. If<br />
the recent move higher in EUR/DKK continues, the<br />
market might as happened in January once again start<br />
to price a faster normalisation.<br />
• However, given that despite the recent risk rally<br />
(1) EUR/DKK continues to trade below central parity,<br />
(2) strong demand continues for Danish bonds, (3) DN<br />
is reluctant to mirror ECB refi-rate cuts and (4) the<br />
risk of new safe-haven inflows into DKK hedging EUR<br />
assets/income using long EUR/DKK tenors might still<br />
be considered.<br />
• The forward discount might also widen further in a<br />
new risk-off move or due to half-year or year-end turn<br />
premiums being priced in.<br />
Arne Lohmann Rasmussen, Chief Analyst, arr@danskebank.dk, +45 45 12 85 32<br />
Fwd discount in EUR/DKK stable<br />
-50<br />
-150<br />
-250<br />
-350<br />
1 month 3 months 12 months<br />
Source: Reuters EcoWin, <strong>Danske</strong> <strong>Bank</strong> Markets<br />
Danish CITA curve steeper than EONIA curve<br />
* The chart shows an approximation of 1M CITA and 1M EONIA forward rates;<br />
blue is current pricing<br />
Source: <strong>Danske</strong> <strong>Bank</strong> Markets<br />
www.danskebank.com/CI<br />
16
USD/CAD – BoC waiting for Fed but be wary of Poloz<br />
• Growth. Canadian data has continued to improve since<br />
bottoming out in early March. Both GDP and<br />
employment growth have surprised on the upside. We<br />
expect Canada to benefit from recovering US activity<br />
going forward.<br />
• Monetary policy. The <strong>Bank</strong> of Canada (BoC) has<br />
maintained its overnight lending rate at 1.00% for the past<br />
two years. New BoC governor Stephen Poloz has so far<br />
revealed very little about his stance on monetary policy but<br />
hinted that he is ‘hands off’ CAD. While Poloz may change<br />
the wording of the monetary policy statement as well as<br />
its long-standing hawkish bias, he will probably find it hard<br />
to turn outright soft with Fed tapering coming up.<br />
• Flows. Speculators have shortened CAD significantly<br />
since the New Year but short covering seen lately.<br />
• Valuation. The CAD is expensive on PPP measures,<br />
although less so than, for example, the AUD.<br />
• Commodities. We expect oil prices to be range-bound<br />
in the near term and head lower on a 12M horizon.<br />
However, oil production is rising in Canada and this<br />
suggests that oil revenue will remain significant.<br />
• Risks. At this point we know very little of the new BoC<br />
governor policy stance: he might surprise with a more<br />
dovish stance than his predecessor.<br />
Christin Tuxen, Senior Analyst, tux@danskebank.dk, +45 45 13 78 67<br />
<strong>Forecast</strong>: 1.02 (3M), 1.04 (6M) and 1.05 (12M)<br />
1.15<br />
1.10<br />
1.05<br />
1.00<br />
0.95<br />
USD/CAD<br />
0.90<br />
Jun-12 Sep-12 Jan-13 Apr-13 Jul-13 Oct-13 Feb-14 May-14<br />
75% conf. int. 50% conf.int. Forward <strong>Danske</strong> fcst Consensus fcst<br />
USD/CAD 1M 3M 6M 12M<br />
<strong>Forecast</strong> (pct'ile) 1.02 (61%) 1.02 (58%) 1.04 (72%) 1.05 (71%)<br />
Fwd. / Consensus 1.02 / 1.02 1.02 / 1.02 1.02 / 1.03 1.03 / 1.02<br />
50% confidence int. 1.00 / 1.03 0.99 / 1.04 0.98 / 1.04 0.97 / 1.06<br />
75% confidence int. 0.99 / 1.04 0.98 / 1.06 0.96 / 1.08 0.94 / 1.10<br />
Source: <strong>Danske</strong> <strong>Bank</strong> Markets<br />
Conclusion. Canada stands to benefit from a US<br />
recovery, which we see materialising notwithstanding<br />
the current soft patch. Unless Poloz is softer than we<br />
expect, CAD could be in for some tailwinds in the near<br />
term as short positioning in the Loonie continues to be<br />
extreme. However, later in the year, the pricing of a Fed<br />
exit should support USD/CAD – though this will likely<br />
happen at a time when BoC rate hikes are also moving<br />
closer and thus upside in the pair is limited.<br />
www.danskebank.com/CI<br />
17
AUD/USD – unfinished business from the RBA<br />
• Growth. Data out of Australia (as well as that of key<br />
trading partner, China) have continued to disappoint<br />
lately, albeit the May job report was a positive surprise.<br />
• Monetary policy. The Reserve <strong>Bank</strong> of Australia (RBA)<br />
cut its cash target rate by 25bp to 2.75% in early May<br />
and the latest Statement on Monetary Policy cut the<br />
inflation outlook slightly. The RBA still sees growth<br />
picking up to trend pace in 2014 but weakening data<br />
could lead governor Stevens to continue easing with a<br />
25bp cut in both Q3 and Q4.<br />
• Flows. Speculators have shortened AUD on a large<br />
scale recently and positioning looks somewhat extreme.<br />
• Valuation. AUD/USD remains overvalued by PPP<br />
measures and an eventual end to the mining boom<br />
underlines the downside risks.<br />
• Commodities. We see only limited potential for metal<br />
prices to move higher from here as the end of the<br />
structural commodities super-cycle is moving closer.<br />
• Risks. The pace of the AUD sell-off has been surprisingly<br />
fast and a near-term correction cannot be ruled out<br />
should commodity prices and/or China surprise on the<br />
upside. Also, if RBA draw its horns in on easing as Fed<br />
starts tapering, AUD could be in for some tailwinds.<br />
Christin Tuxen, Senior Analyst, tux@danskebank.dk, +45 45 13 78 67<br />
<strong>Forecast</strong>: 0.94 (3M), 0.92 (6M) and 0.87 (12M)<br />
1.10<br />
1.05<br />
1.00<br />
0.95<br />
0.90<br />
0.85<br />
AUD/USD<br />
0.80<br />
Jun-12 Sep-12 Jan-13 Apr-13 Jul-13 Oct-13 Feb-14 May-14<br />
75% conf. int. 50% conf.int. Forward <strong>Danske</strong> fcst Consensus fcst<br />
AUD/USD 1M 3M 6M 12M<br />
<strong>Forecast</strong> (pct'ile) 0.95 (36%) 0.94 (34%) 0.92 (29%) 0.87 (21%)<br />
Fwd. / Consensus 0.96 / 0.99 0.95 / 0.97 0.95 / 0.96 0.94 / 0.96<br />
50% confidence int. 0.94 / 0.98 0.92 / 0.99 0.91 / 1.00 0.89 / 1.01<br />
75% confidence int. 0.92 / 1.00 0.89 / 1.01 0.86 / 1.03 0.82 / 1.04<br />
Source: <strong>Danske</strong> <strong>Bank</strong> Markets<br />
Conclusion. With the RBA having proved it is<br />
determined to use its ammunition to stimulate the<br />
domestic economy and with a dollar trough in sight, the<br />
potential for AUD/USD upside from here should be<br />
limited. In particular, during H2 AUD faces further RBA<br />
cuts and the impairment in commodity terms of trade<br />
as the mining cycle wears off. Thus, on a 3-6M horizon<br />
AUD/USD could come under pressure as the<br />
struggling non-mining sector down under contrasts<br />
with a decent US outlook, and the RBA and the Fed will<br />
likely respond accordingly.<br />
www.danskebank.com/CI<br />
18
NZD/USD – RBNZ to act harshly on any kiwi strength<br />
• Growth. Economic releases have started to show a tiny<br />
bit of weakness lately following a year of mostly positive<br />
surprises this year. Not least the construction sector is<br />
booming due to the earthquake reconstruction.<br />
• Monetary policy. The Reserve <strong>Bank</strong> of New Zealand<br />
(RNBZ) has kept rates at 2.50% since the earthquakerelated<br />
cut early in 2011. Following a range of warnings<br />
since his inauguration RBNZ governor Wheeler has<br />
started to intervene to curb NZD strength. RBNZ is<br />
struggling with the risks to financial stability from a<br />
booming construction sector, whereas the rest of the<br />
economy suffers from an overvalued NZD. We think<br />
Wheeler will leave the cash rate unchanged for the<br />
foreseeable future and rather use intervention to<br />
stimulate domestic growth.<br />
• Flows: A good deal of speculative longs in kiwi have<br />
been unwound and we are now in neutral territory.<br />
• Valuation. NZD is heavily overvalued in PPP terms.<br />
• Commodities. While energy prices could trend lower<br />
the prices of New Zealand many agricultural products<br />
may stay at elevated levels.<br />
• Risks. If the Reserve <strong>Bank</strong> of Australia cuts more<br />
aggressively than we currently project, RBNZ may<br />
follow suit.<br />
Christin Tuxen, Senior Analyst, tux@danskebank.dk, +45 45 13 78 67<br />
<strong>Forecast</strong>: 0.79 (3M), 0.77 (6M) and 0.75 (12M)<br />
0.90<br />
0.85<br />
0.80<br />
0.75<br />
0.70<br />
0.65<br />
Jun-12 Sep-12 Jan-13 Apr-13 Jul-13 Oct-13 Feb-14 May-14<br />
NZD/USD 1M 3M 6M 12M<br />
<strong>Forecast</strong> (pct'ile) 0.80 (38%) 0.79 (35%) 0.77 (29%) 0.75 (29%)<br />
Fwd. / Consensus 0.81 / 0.82 0.80 / 0.80 0.80 / 0.80 0.79 / 0.81<br />
50% confidence int. 0.79 / 0.83 0.77 / 0.84 0.76 / 0.84 0.73 / 0.85<br />
75% confidence int. 0.77 / 0.84 0.74 / 0.86 0.72 / 0.87 0.67 / 0.89<br />
Source: <strong>Danske</strong> <strong>Bank</strong> Markets<br />
NZD/USD<br />
75% conf. int. 50% conf.int. Forward <strong>Danske</strong> fcst Consensus fcst<br />
Conclusion. With house- rather than consumer-price<br />
inflation the key worry for RBNZ and Wheeler having<br />
revealed his willingness to resort to intervention to<br />
curb NZD peaks, upside for kiwi should be very limited<br />
from current levels. As for most USD crosses, we see<br />
further downside in H2, as the USD stands to receive<br />
support from a Fed exit at a time when RBNZ will<br />
remain focused on the outlook for the domestic<br />
economy and the country’s competitiveness. Relative<br />
to AUD we see potential in NZD as New Zealand is<br />
less vulnerable to the commodities that we see<br />
suffering going forward.<br />
www.danskebank.com/CI<br />
19
EUR/PLN – weak economy weighs on zloty<br />
• Growth: The steady but marked decline in the Polish<br />
economy throughout 2012 continued in Q1 13, as<br />
growth was a disappointing 0.5% y/y. Domestic demand<br />
in particular continues to suffer. A softer stance from the<br />
Polish central bank (NBP) should help the recovery but<br />
the outlook for 2013 looks bleak nevertheless.<br />
• Monetary policy: The Polish central bank (NBP) has been<br />
overly hawkish over the past year despite a fairly sharp<br />
slowdown in growth and very subdued inflation<br />
pressures. That said, with inflation now well below its<br />
official 2.5% inflation forecast, the NBP now seems to be<br />
softening its stance a bit. However, we believe that the<br />
NBP will have to do a lot more and we now expect it to cut<br />
interest rates by 75bp more in total to 2.00% in the<br />
coming year.<br />
• Valuation: The PLN is trading close to its fair value level,<br />
so valuation is unlikely to pose any significant hindrance<br />
to its continued near-term appreciation.<br />
• Risks: The biggest risk for the zloty is clearly the sharp<br />
slowdown in the Polish economy and the need for further<br />
monetary easing.<br />
<strong>Forecast</strong>: 4.30 (3M), 4.30 (6M) and 4.35(12M)<br />
4.7<br />
EUR/PLN<br />
4.6<br />
4.5<br />
4.4<br />
4.3<br />
4.2<br />
4.1<br />
4.0<br />
3.9<br />
Jun-12 Sep-12 Jan-13 Apr-13 Jul-13 Oct-13 Feb-14 May-14<br />
75% conf. int. 50% conf.int. Forward <strong>Danske</strong> fcst Consensus fcst<br />
EUR/PLN 1M 3M 6M 12M<br />
<strong>Forecast</strong> (pct'ile) 4.25 (58%) 4.30 (67%) 4.30 (62%) 4.35 (64%)<br />
Fwd. / Consensus 4.24 / 4.18 4.26 / 4.20 4.28 / 4.16 4.33 / 4.07<br />
50% confidence int. 4.17 / 4.30 4.14 / 4.34 4.11 / 4.39 4.07 / 4.45<br />
75% confidence int. 4.13 / 4.36 4.07 / 4.45 4.01 / 4.54 3.92 / 4.68<br />
Source: <strong>Danske</strong> <strong>Bank</strong> Markets<br />
Conclusion: The Polish zloty has been hard hit by the<br />
recent increase in global risk aversion as well as worries<br />
about the outlook for the zloty. Looking ahead, we see<br />
further downside risk on the zloty due to particularly<br />
weak Polish growth. However, the downside is clearly<br />
curbed by a now more attractive valuation of the zloty.<br />
So, while we continue to caution that it could weaken<br />
further in the next one to three months, we do not see<br />
any reason for panic. We would even begin to consider<br />
entering into long zloty positions if the zloty weakens<br />
much more.<br />
Lars Christensen, Chief Analyst, larch@danskebank.com, +45 45 12 85 30<br />
www.danskebank.com/CI<br />
20
EUR/HUF – policy uncertainties but much is already priced in<br />
• Growth: Very weak domestic demand and lacklustre<br />
export growth weigh on the economy. Furthermore, we<br />
are increasingly reaching the conclusion that the key<br />
reason for Hungary’s lacklustre growth performance is a<br />
continued deterioration in ‘supply-side conditions’.<br />
Continued political ‘noise’ is certainly not helping.<br />
• Monetary policy: The outlook for monetary policy has<br />
become even more uncertain since former Economics<br />
Minister György Matolcsy became the new central bank<br />
governor. This means the outlook for Hungarian<br />
monetary policy is highly uncertain. However, we expect<br />
the Hungarian central bank (MNB) to continue to cut<br />
rates gradually, as we expect inflation to continue to<br />
decline. However, we think that the MNB will be fairly<br />
cautious in the rate cutting cycle to try to avoid a sharp<br />
weakening of the forint.<br />
• Valuation: Inflation could potentially become a valuation<br />
issue in the medium term.<br />
• Risks: The biggest risk for the forint clearly remains<br />
political uncertainty in Hungary and the risk that the<br />
Hungarian government once again will ‘misstep’ in<br />
economic policy.<br />
<strong>Forecast</strong>: 295(3M), 295 (6M) and 295 (12M)<br />
320<br />
EUR/HUF<br />
310<br />
300<br />
290<br />
280<br />
270<br />
260<br />
250<br />
Jun-12 Sep-12 Jan-13 Apr-13 Jul-13 Oct-13 Feb-14 May-14<br />
75% conf. int. 50% conf.int. Forward <strong>Danske</strong> fcst Consensus fcst<br />
EUR/HUF 1M 3M 6M 12M<br />
<strong>Forecast</strong> (pct'ile) 293.00 (69%) 295.00 (71%) 295.00 (69%) 295.00 (67%)<br />
Fwd. / Consensus 290.0 / 295.4 290.1 / 296.7 290.1 / 296.2 290.1 / 299.3<br />
50% confidence int. 284.0 / 294.4 280.0 / 296.6 275.8 / 298.3 269.5 / 300.5<br />
75% confidence int. 280.4 / 299.5 273.7 / 305.1 267.2 / 310.1 254.3 / 316.4<br />
Source: <strong>Danske</strong> <strong>Bank</strong> Markets<br />
Conclusion: The forint has been hit by the recent global<br />
financial jitters. However, it has held up fairly well<br />
compared with many other emerging market currencies.<br />
We believe this has to do with the fairly high carry on the<br />
forint and fairly strong external balances. We believe this<br />
will be supportive for the forint going forward as well.<br />
Lars Christensen, Chief Analyst, larch@danskebank.com, +45 45 12 85 30<br />
www.danskebank.com/CI<br />
21
EUR/CZK – weak economy and political jitters to weigh on<br />
the CZK<br />
• Growth. The outlook for the Czech economy is not positive.<br />
Everything points to much weaker growth than implied by our<br />
current forecast of a decline in GDP of around 0.2% y/y this<br />
year. Considering the final release of Q1 GDP, which showed<br />
quite sharp downward revisions to GDP falling 2.2% y/y, the<br />
risks are squeezed for a larger fall in GDP this year – by as<br />
much as 1.0% y/y.<br />
• Monetary policy. The key policy rate is at a technical zero of<br />
0.05% and the CNB stated that it is ready to use the <strong>FX</strong><br />
channel for further monetary easing, as negative rates are not<br />
an option. Even though further easing is needed given the<br />
weak economy, the CNB has so far been reluctant to use this<br />
intervention and most of the board members still see no need<br />
for further easing. That said, with the CZK currently stronger<br />
together with worse-than-expected economic activity, the<br />
need to ease monetary policy through <strong>FX</strong> intervention has<br />
increased further. However, we still do not think that the CNB<br />
is anywhere closer to entering the <strong>FX</strong> market and weakening<br />
the CZK at present.<br />
• Debt risks are low. The Czech government forecasts the<br />
public finance deficit to be below 3% this year.<br />
• Valuation. From a long-term perspective, CZK is undervalued<br />
(fair value is around 23.4 against EUR).<br />
• Risks. Intervention risks in connection with further monetary<br />
easing, long-lasting political jitters<br />
<strong>Forecast</strong>: 26.1 (3M), 26.2 (6M) and 26.0 (12M)<br />
27.5<br />
EUR/CZK<br />
27.0<br />
26.5<br />
26.0<br />
25.5<br />
25.0<br />
24.5<br />
24.0<br />
Jun-12 Sep-12 Jan-13 Apr-13 Jul-13 Oct-13 Feb-14 May-14<br />
75% conf. int. 50% conf.int. Forward <strong>Danske</strong> fcst Consensus fcst<br />
EUR/CZK 1M 3M 6M 12M<br />
<strong>Forecast</strong> (pct'ile) 26.00 (74%) 26.10 (73%) 26.20 (73%) 26.00 (65%)<br />
Fwd. / Consensus 25.78 / 25.98 25.78 / 25.91 25.78 / 25.77 25.77 / 25.52<br />
50% confidence int. 25.48 / 26.01 25.26 / 26.14 25.05 / 26.25 24.77 / 26.37<br />
75% confidence int. 25.28 / 26.27 24.94 / 26.60 24.61 / 26.90 24.16 / 27.30<br />
Source: <strong>Danske</strong> <strong>Bank</strong> Markets<br />
Conclusion. The CZK has gained some ground on global<br />
risk-off sentiment, which favours the ‘safe haven’ status<br />
currencies such as the CZK. A stronger CZK and weaker<br />
economic growth have increased the need for <strong>FX</strong><br />
intervention by the CNB. Nonetheless, we do not think<br />
that the CNB will start intervening any time soon and only<br />
the verbal interventions from the CNB seem likely at this<br />
point. We keep our bearish view on the CZK on all<br />
forecast horizons for three to 12 months. However, our<br />
CZK forecast reflects the weakness in the economy<br />
rather than any action by the CNB.<br />
Stanislava Pravdová-Nielsen, Analyst, spra@danskebank.com, +45 45 12 80 71<br />
www.danskebank.com/CI<br />
22
EUR/RUB – Fed and BoJ shake the rouble<br />
• Growth. The Russian economy continues to grow slowly,<br />
expanding 2.6% y/y in April 2013 and just 1.8% in<br />
January-April. H2 13 is expected to deliver a better<br />
performance due to decelerating inflation. We keep our<br />
2013 GDP growth forecast at 2.9% y/y.<br />
• Monetary policy. We expect the Russian central bank to<br />
be on hold at its July monetary policy meeting, as new<br />
governor Elvira Nabiullina will start in late June. However,<br />
we expect a first rate cut in August 2013.<br />
• Flows. Capital outflows were USD56.8bn in 2012 versus<br />
almost USD81bn in 2011 and we expect this to slow to<br />
USD50bn in 2013. <strong>Bank</strong> Rossii continues to see ‘a massive<br />
outflow’ and does not expect it ‘to moderate in the near<br />
future’.<br />
• Valuation. EUR/RUB is trading heavily above its 1M<br />
average of 41.39 and strong upside risk is still present.<br />
• Risks. <strong>Bank</strong> Rossii’s rate cuts, the deterioration of the<br />
current account surplus and the Fed’s and BoJ’s tapering<br />
of economic stimulus in upcoming months are weighing on<br />
the RUB.<br />
Vladimir Miklashevsky, Economist/Trading Desk Strategist,<br />
vlmi@danskebank.com, +358 10 546 75 22<br />
<strong>Forecast</strong>: 43.25 (3M), 43.00 (6M) and 40.95 (12M)<br />
50<br />
48<br />
46<br />
44<br />
42<br />
40<br />
EUR/RUB<br />
38<br />
Jun-12 Sep-12 Jan-13 Apr-13 Jul-13 Oct-13 Feb-14 May-14<br />
75% conf. int. 50% conf.int. Forward <strong>Danske</strong> fcst Consensus fcst<br />
EUR/RUB 1M 3M 6M 12M<br />
<strong>Forecast</strong> (pct'ile) 41.75 (34%) 43.25 (67%) 43.00 (54%) 40.95 (23%)<br />
Fwd. / Consensus 42.29 / 40.92 42.75 / 40.98 43.40 / 40.95 44.67 / 41.68<br />
50% confidence int. 41.48 / 42.88 41.26 / 43.72 41.18 / 44.60 41.12 / 46.14<br />
75% confidence int. 41.02 / 43.55 40.49 / 44.96 40.06 / 46.46 39.02 / 48.81<br />
Source: <strong>Danske</strong> <strong>Bank</strong> Markets<br />
• Conclusion. We still believe that <strong>Bank</strong> Rossii seems to<br />
be comfortable with a weak rouble. Yet, in late May<br />
2013 it started <strong>FX</strong> interventions selling around<br />
USD70m a day, and after a break-up of 37.03 in<br />
RUBBASK increased them to USD200m, the largest in<br />
12M.<br />
• We see upside risks for the EUR/RUB in the coming<br />
three to six months. As Q3 is set to post a weaker<br />
current account surplus and the Russian Finance<br />
Ministry is planning to launch an <strong>FX</strong> purchase<br />
mechanism on the domestic market.<br />
www.danskebank.com/CI<br />
23
EUR/RUB – important issues to watch<br />
• High volatility has come to dwell<br />
− As we expected in our previous publications, the RUB’s<br />
volatility has increased since early 2013. Just within two<br />
weeks we saw the RUB losing 7% against the EUR. The<br />
band-widening policy is likely to continue this year, as<br />
<strong>Bank</strong> Rossii’s deputy chairman Sergey Shvetsov stated<br />
in April 2013.<br />
− A weaker rouble looks attractive for Russian export<br />
sectors. There are speculations that weakening the<br />
RUB might be one of key tools of Putin’s economic<br />
stimulus programme, which is currently under<br />
discussion.<br />
− As the local bond market has opened for foreign<br />
investors, the most recent OFZ auctions attracted new<br />
inflows supporting the RUB. We expect the trend to<br />
continue in 2013-14.<br />
− As Putin stated that the wellbeing fund may be needed<br />
to cover the pension fund deficit, it supports the RUB<br />
through likely sales of <strong>FX</strong> assets and RUB buys.<br />
However, in the long run, we see it being negative for the<br />
Russian economy as it signals that Russia’s budget<br />
revenues are set to shrink in the future.<br />
42<br />
40<br />
38<br />
36<br />
34<br />
32<br />
30<br />
37.5<br />
37<br />
36.5<br />
36<br />
35.5<br />
35<br />
34.5<br />
34<br />
Rouble's trading band vs. dual currency basket<br />
lower border<br />
upper border<br />
RUBBASK Curncy<br />
daily USD200m interventions started<br />
RUBBASK Curncy<br />
daily USD70m interventions started<br />
42<br />
40<br />
38<br />
36<br />
34<br />
32<br />
30<br />
37.5<br />
37<br />
36.5<br />
36<br />
35.5<br />
35<br />
34.5<br />
34<br />
Vladimir Miklashevsky, Economist/Trading Desk Strategist,<br />
vlmi@danskebank.com, +358 10 546 75 22<br />
www.danskebank.com/CI<br />
24
USD/TRY – political uncertainty and less supportive global<br />
risk environment to weigh on TRY<br />
• Growth. The Turkish economy weakened sharply in 2012<br />
(GDP 2.3% y/y) after strong growth in 2011 (GDP growth<br />
8.6%). The main culprit was the sharp fall in domestic<br />
demand and investments. Despite the slowdown and still<br />
uncertain outlook for the global economy, the Turkish<br />
economy should rebound this year as domestic demand and<br />
investments are expected to recover and contribute<br />
positively to growth. We expect GDP growth in 2013 to be<br />
around 3.6% y/y.<br />
• The current account deficit remains large and we expect<br />
the current account to widen again as domestic demand is<br />
expected to recover. We expect the CA deficit to widen to -<br />
6.8% in 2013, to -7.3% in 2014 and to -7.4% in 2015.<br />
• Monetary policy. On 16 April 2013 Turkey’s central bank<br />
cut its key rates by 50bp: benchmark repo rate decreased<br />
to 5.00%. Given the recent sell-off in lira and the increased<br />
volatility and last but not least the expected economic<br />
recovery, we do not expect further monetary easing from<br />
the TCMB.<br />
• Valuation. TRY remains fundamentally overvalued (fair<br />
value around 2.10).<br />
• Risks. Less monetary easing by major central banks globally<br />
is increasing volatilities in global flows, hitting TRY together<br />
with other EM currencies.<br />
<strong>Forecast</strong>: 1.87(3M), 1.91(6M) and 1.98(12M)<br />
2.15<br />
USD/TRY<br />
2.10<br />
2.05<br />
2.00<br />
1.95<br />
1.90<br />
1.85<br />
1.80<br />
1.75<br />
1.70<br />
Jun-12 Sep-12 Jan-13 Apr-13 Jul-13 Oct-13 Feb-14 May-14<br />
75% conf. int. 50% conf.int. Forward <strong>Danske</strong> fcst Consensus fcst<br />
USD/TRY 1M 3M 6M 12M<br />
<strong>Forecast</strong> (pct'ile) 1.86 (50%) 1.87 (50%) 1.91 (64%) 1.98 (71%)<br />
Fwd. / Consensus 1.87 / 1.82 1.89 / 1.84 1.91 / 1.85 1.97 / 1.81<br />
50% confidence int. 1.84 / 1.89 1.83 / 1.92 1.83 / 1.95 1.82 / 2.00<br />
75% confidence int. 1.82 / 1.93 1.80 / 1.97 1.78 / 2.02 1.73 / 2.11<br />
Source: <strong>Danske</strong> <strong>Bank</strong> Markets<br />
Conclusion. The combination of sharply increased<br />
political uncertainty in Turkey and a rise in global risk<br />
aversion has hit the Turkish lira hard recently. We expect<br />
political uncertainty to remain elevated for some time to<br />
come. Furthermore, we would stress that Turkey’s<br />
sizable current account is likely to weigh on the lira in the<br />
medium term. The scope for further lira weakness,<br />
however, will be curbed by the fact that the valuation of<br />
the lira has become more attractive after the recent selloff.<br />
Vladimir Miklashevsky, Economist/Trading Desk Strategist, vlmi@danskebank.com, +358 10 546 75 22<br />
www.danskebank.com/CI<br />
25
USD/ZAR – risk of weaker rand remains high<br />
• Growth. In 2012, real GDP expanded by 2.5% following 3.5%<br />
GDP growth in 2011. Overall, 2012 GDP growth came out<br />
more or less in line with our expectations. Looking ahead, we<br />
estimate average GDP growth of 2.3% y/y in 2013, 3.1% y/y<br />
in 2014 and 3.3% y/y in 2015. Overall, the risks to our 2013<br />
GDP forecast are on the downside given the continued<br />
strikes which are paralysing production in the mining sector.<br />
• Monetary policy. The SARB MPC meeting at the end of May<br />
did not bring any changes to interest rate setting and the<br />
MPC maintained the key policy rate at 5.00%. While in the<br />
statement the central bank was concerned about the growth<br />
outlook, upside inflation risks have increased due to a<br />
depreciating and volatile exchange rate. Even though the<br />
SARB still maintains its accommodative monetary policy<br />
stance, given the challenging global environment towards EM<br />
the room for manoeuvre is very limited. This means that the<br />
SARB will, in our view, be on hold throughout 2013.<br />
• Debt risks. The South African government raised the<br />
projected 2012/13 budget deficit to 5.2% (from 4.8%). The<br />
South African credit rating was, among other things, cut on<br />
the widening of the budget deficit.<br />
• Valuation. ZAR remains fundamentally overvalued (fair value<br />
around 10.50).<br />
• Risks. Loss of investor confidence due to intensified socioeconomic<br />
problems, further downgrade by the rating agencies.,<br />
a widening current account deficit.<br />
Stanislava Pravdová-Nielsen , Analyst, spra@danskebank.com, +45 45 12 80 7<br />
<strong>Forecast</strong>: 10.1(3M), 10.2 (6M) and 10.3 (12M)<br />
12.50<br />
USD/ZAR<br />
12.00<br />
11.50<br />
11.00<br />
10.50<br />
10.00<br />
9.50<br />
9.00<br />
8.50<br />
8.00<br />
Jun-12 Sep-12 Jan-13 Apr-13 Jul-13 Oct-13 Feb-14 May-14<br />
75% conf. int. 50% conf.int. Forward <strong>Danske</strong> fcst Consensus fcst<br />
USD/ZAR 1M 3M 6M 12M<br />
<strong>Forecast</strong> (pct'ile) 9.95 (58%) 10.10 (63%) 10.20 (63%) 10.30 (60%)<br />
Fwd. / Consensus 9.92 / 9.30 10.01 / 9.52 10.14 / 9.51 10.42 / 9.52<br />
50% confidence int. 9.55 / 10.19 9.37 / 10.40 9.19 / 10.63 8.99 / 10.99<br />
75% confidence int. 9.34 / 10.49 9.04 / 10.94 8.73 / 11.40 8.22 / 12.09<br />
Source: <strong>Danske</strong> <strong>Bank</strong> Markets<br />
Conclusion: The rand has been subject to a significant selloff<br />
over the past two weeks, triggered by the general selloff<br />
in EM assets on the back of the changing outlook for<br />
global monetary policy, which is negative for EM. We<br />
have not changed our stance on the rand and remain<br />
bearish on all forecast horizons. On the short horizon, it<br />
is the technical picture and drop in commodity prices<br />
which are likely to weigh on the rand, while fundamental<br />
overvaluation could weigh on the currency on a 12-<br />
month horizon. The continued volatility will remain<br />
intact given the uncertain outlook for global monetary<br />
policy, which is key for sentiment towards the emerging<br />
markets.<br />
www.danskebank.com/CI<br />
26
USD/CNY – trading band to be widened<br />
• Growth. The main uncertainty in China is the pace of the<br />
deceleration in China’s long term growth potential.<br />
Cyclically the recovery in China remains fragile and recent<br />
data suggest that growth has started to ease again, albeit<br />
so far not dramatically. Growth in China appears to be<br />
moving sideways slightly below 8%.<br />
• Monetary policy. Inflation remains subdued below 2.5% y/y<br />
and although we expect it to increase moderately in H2 13,<br />
we expect it to stay below 3% y/y, substantially below the<br />
government’s 3.5% target for inflation in 2013. Policy focus<br />
is now that the current weakness is not severe enough to<br />
force additional monetary and fiscal stimulus.<br />
• <strong>FX</strong> policy. China is gradually moving towards full<br />
convertibility and a floating exchange rate and the daily<br />
trading band is soon expected to widen further from +/-1%<br />
to +/-2%. A crackdown on illegal capital inflows since early<br />
May appears to have been successful in curbing<br />
speculative capital inflows and this is expected to slow the<br />
appreciation pace in coming months.<br />
• Valuation. Fundamentally, CNY is, in our view, now only<br />
slightly undervalued (about 7%).<br />
• Risks: Should growth slow substantially below 7.5%, focus<br />
is likely to be on stabilising growth and this would probably<br />
include slowing the appreciation of CNY. A substantial<br />
depreciation of other Asian currencies could also force<br />
China to slow its appreciation.<br />
<strong>Forecast</strong>: 6.10 (3M), 6.04 (6M) and 5.98 (12M)<br />
6.6<br />
6.5<br />
6.4<br />
6.3<br />
6.2<br />
6.1<br />
Apr<br />
Jul Oct Jan<br />
11<br />
Source: <strong>Danske</strong> <strong>Bank</strong> Markets<br />
USD/CNY exchange rate<br />
Trading band<br />
widened<br />
PBoC reference rate<br />
Daily trading band<br />
Spot<br />
Apr Jul Oct Jan<br />
12<br />
Apr<br />
13<br />
Conclusion. The CNY is slightly undervalued and we<br />
expect it to appreciate only moderately as China<br />
gradually moves towards a convertible currency and a<br />
floating exchange rate. In the future, we also expect to<br />
see increasing two-way volatility in the exchange rate.<br />
Speculative capital inflows have eased and we expect<br />
this to slow the appreciation pace compared with recent<br />
months. We expect the daily trading band to widen soon,<br />
from +/-1% to +/- 2%.<br />
6.6<br />
6.5<br />
6.4<br />
6.3<br />
6.2<br />
6.1<br />
Flemming Jegbjærg Nielsen, Senior Analyst, flemm@danskebank.com, +45 45 12 85 35<br />
www.danskebank.com/CI<br />
27
<strong>Danske</strong> Markets <strong>FX</strong> forecasts<br />
<strong>Forecast</strong> <strong>Forecast</strong> vs forward outright, %<br />
Spot +1m +3m +6m +12m +1m +3m +6m +12m<br />
Exchange rates vs EUR<br />
USD 1.334 1.32 1.30 1.27 1.26 -1.1 -2.6 -4.9 -5.8<br />
JPY 126.5 130 131 133 139 2.7 3.5 5.1 10.0<br />
GBP 0.849 0.85 0.86 0.87 0.84 0.1 1.2 2.3 -1.5<br />
CHF 1.232 1.24 1.24 1.24 1.24 0.7 0.7 0.8 0.9<br />
DKK 7.46 7.46 7.46 7.46 7.46 0.0 0.1 0.1 0.2<br />
NOK 7.64 7.50 7.45 7.40 7.35 -1.9 -2.8 -3.9 -5.3<br />
SEK 8.60 8.50 8.40 8.30 8.20 -1.3 -2.6 -4.0 -5.7<br />
Exchange rates vs USD<br />
JPY 94.9 98 101 105 110 3.8 6.3 10.5 16.7<br />
GBP 1.57 1.55 1.51 1.46 1.50 -1.1 -3.7 -7.0 -4.3<br />
CHF 0.92 0.94 0.95 0.98 0.98 1.8 3.4 6.0 7.1<br />
DKK 5.59 5.65 5.74 5.87 5.92 1.1 2.8 5.3 6.3<br />
NOK 5.72 5.68 5.73 5.83 5.83 -0.9 -0.2 1.1 0.6<br />
SEK 6.45 6.44 6.46 6.54 6.51 -0.2 0.0 1.0 0.2<br />
CAD 1.02 1.02 1.02 1.04 1.05 0.4 0.2 2.0 2.5<br />
AUD 0.96 0.95 0.94 0.92 0.87 -0.9 -1.5 -3.0 -7.1<br />
NZD 0.81 0.80 0.79 0.77 0.75 -0.8 -1.6 -3.5 -4.6<br />
CNY 6.12 6.10 6.04 5.98 -1.4 -2.8 -4.5<br />
Note: GBP, AUD and NZD are denominated in local currency rather than USD<br />
Source: <strong>Danske</strong> <strong>Bank</strong> Markets<br />
www.danskebank.com/CI<br />
28
<strong>Danske</strong> Markets <strong>FX</strong> forecasts vs DKK<br />
<strong>Forecast</strong> <strong>Forecast</strong> vs forward outright, %<br />
Spot +1m +3m +6m +12m +1m +3m +6m +12m<br />
Exchange rates vs DKK<br />
EUR 7.46 7.46 7.46 7.46 7.46 0.0 0.1 0.1 0.2<br />
USD 5.59 5.65 5.74 5.87 5.92 1.1 2.8 5.3 6.3<br />
JPY 5.89 5.74 5.69 5.61 5.37 -2.6 -3.3 -4.8 -8.9<br />
GBP 8.78 8.78 8.67 8.57 8.88 0.0 -1.1 -2.1 1.7<br />
CHF 6.05 6.02 6.02 6.02 6.02 -0.6 -0.6 -0.6 -0.7<br />
NOK 0.98 0.99 1.00 1.01 1.01 2.0 3.0 4.1 5.7<br />
SEK 0.87 0.88 0.89 0.90 0.91 1.3 2.7 4.3 6.1<br />
CAD 5.51 5.54 5.63 5.65 5.64 0.7 2.5 3.2 3.7<br />
AUD 5.37 5.37 5.39 5.40 5.15 0.2 1.1 2.0 -1.3<br />
NZD 4.52 4.52 4.53 4.52 4.44 0.3 1.1 1.6 1.3<br />
PLN 1.76 1.73 1.73 1.71 -0.9 -0.2 -0.2<br />
CZK 0.29 0.29 0.28 0.29 -1.3 -1.6 -0.8<br />
HUF 0.26 0.25 0.25 0.25 -0.2 0.7 2.2<br />
RUB 0.18 0.17 0.17 0.18 -1.0 1.1 8.8<br />
Source: <strong>Danske</strong> <strong>Bank</strong> Markets<br />
www.danskebank.com/CI<br />
29
<strong>Danske</strong> Markets <strong>FX</strong> forecasts vs SEK<br />
<strong>Forecast</strong> <strong>Forecast</strong> vs forward outright, %<br />
Spot +1m +3m +6m +12m +1m +3m +6m +12m<br />
Exchange rates vs SEK<br />
EUR 8.60 8.50 8.40 8.30 8.20 -1.3 -2.6 -4.0 -5.7<br />
USD 6.45 6.44 6.46 6.54 6.51 -0.2 0.0 1.0 0.2<br />
JPY 6.80 6.54 6.41 6.24 5.90 -3.9 -5.9 -8.7 -14.2<br />
GBP 10.13 10.00 9.77 9.54 9.76 -1.3 -3.7 -6.1 -4.2<br />
CHF 6.98 6.85 6.77 6.69 6.61 -1.9 -3.3 -4.7 -6.5<br />
NOK 1.13 1.13 1.13 1.12 1.12 0.7 0.2 -0.1 -0.4<br />
DKK 1.15 1.14 1.13 1.11 1.10 -1.3 -2.7 -4.1 -5.8<br />
CAD 6.35 6.31 6.33 6.28 6.20 -0.6 -0.2 -1.0 -2.3<br />
AUD 6.20 6.12 6.07 6.01 5.66 -1.1 -1.5 -2.1 -7.1<br />
NZD 5.21 5.15 5.10 5.03 4.88 -1.0 -1.6 -2.6 -4.6<br />
PLN 2.03 1.95 1.93 1.89 -3.5 -4.3 -6.1<br />
CZK 0.33 0.32 0.32 0.32 -3.9 -5.7 -6.6<br />
HUF 0.30 0.28 0.28 0.28 -2.9 -3.4 -3.7<br />
RUB 0.20 0.19 0.19 0.20 -3.6 -3.0 3.0<br />
Source: <strong>Danske</strong> <strong>Bank</strong> Markets<br />
www.danskebank.com/CI<br />
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<strong>Danske</strong> Markets <strong>FX</strong> forecasts vs NOK<br />
<strong>Forecast</strong> <strong>Forecast</strong> vs forward outright, %<br />
Spot +1m +3m +6m +12m +1m +3m +6m +12m<br />
Exchange rates vs NOK<br />
EUR 7.64 7.50 7.45 7.40 7.35 -1.9 -2.8 -3.9 -5.3<br />
USD 5.72 5.68 5.73 5.83 5.83 -0.9 -0.2 1.1 0.6<br />
JPY 6.04 5.77 5.69 5.56 5.29 -4.5<br />
GBP 8.99 8.82 8.66 8.51 8.75 -2.0 -4.0 -6.0 -3.8<br />
CHF 6.20 6.05 6.01 5.97 5.93 -2.6 -3.5 -4.6 -6.1<br />
SEK 0.89 0.88 0.89 0.89 0.90 -0.7 -0.2 0.1 0.4<br />
DKK 1.02 1.01 1.00 0.99 0.99 -2.0 -2.9 -4.0 -5.4<br />
CAD 5.64 5.57 5.62 5.60 5.56 -1.2 -0.5 -0.9 -1.9<br />
AUD 5.50 5.40 5.39 5.36 5.08 -1.8 -1.8 -2.0 -6.7<br />
NZD 4.63 4.55 4.53 4.49 4.38 -1.6 -1.9 -2.4 -4.2<br />
PLN 1.80 1.73 1.72 1.69 -3.8 -4.2 -5.7<br />
CZK 0.30 0.29 0.28 0.28 -4.2 -5.6 -6.2<br />
HUF 0.26 0.25 0.25 0.25 -3.1 -3.3 -3.3<br />
RUB 0.18 0.17 0.17 0.18 -3.9 -2.9 3.4<br />
Source: <strong>Danske</strong> <strong>Bank</strong> Markets<br />
www.danskebank.com/CI<br />
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EMEA <strong>FX</strong> forecasts<br />
EUR USD DKK SEK NOK<br />
<strong>Danske</strong> Forward <strong>Danske</strong> Forward <strong>Danske</strong> Forward <strong>Danske</strong> Forward <strong>Danske</strong> Forward<br />
PLN 14-Jun 4.24 3.18 175.9 202.5 179.9<br />
+1M 4.25 4.25 3.22 3.18 175.5 200.0 202.2 176.5<br />
+3M 4.30 4.27 3.31 3.20 173.5 174.7 195.3 201.8 173.3 179.5<br />
+6M 4.30 4.29 3.39 3.21 173.5 173.6 193.0 201.1 172.1 179.2<br />
+12M 4.35 4.33 3.45 3.24 171.5 171.7 188.5 200.1 169.0 178.8<br />
HUF 14-Jun 293 218 2.55 2.94 2.61<br />
+1M 293 291.4 222 218.2 2.55 2.90 2.95 2.56<br />
+3M 295 293.1 227 219.5 2.53 2.54 2.85 2.94 2.53 2.61<br />
+6M 295 295.5 232 221.2 2.53 2.52 2.81 2.92 2.51 2.60<br />
+12M 295 299.8 234 224.2 2.53 2.48 2.78 2.89 2.49 2.58<br />
CZK 14-Jun 25.7 19.3 29.1 33.5 29.7<br />
+1M 26.0 25.7 19.7 19.3 28.7 32.7 33.4 28.8<br />
+3M 26.1 25.7 20.1 19.3 28.6 29.0 32.2 33.5 28.5 29.8<br />
+6M 26.2 25.7 20.6 19.3 28.5 29.0 31.7 33.6 28.2 29.9<br />
+12M 26.0 25.7 20.6 19.2 28.7 29.0 31.5 33.8 28.3 30.2<br />
RUB 14-Jun 42.35 31.97 17.61 20.28 18.01<br />
+1M 41.75 42.58 31.63 31.89 17.87 20.36 20.19 17.96<br />
+3M 43.25 43.02 33.27 32.22 17.25 17.33 19.42 20.01 17.23 17.80<br />
+6M 43.00 43.66 33.86 32.69 17.35 17.06 19.30 19.76 17.21 17.61<br />
+12M 40.95 44.92 32.50 33.58 18.22 16.57 20.02 19.31 17.95 17.25<br />
TRY 14-Jun 2.48 1.86 301 347 308<br />
+1M 2.46 2.49 1.86 1.86 303 346 345 305<br />
+3M 2.43 2.51 1.87 1.88 307 297 346 343 307 305<br />
+6M 2.43 2.54 1.91 1.90 307 293 342 339 305 302<br />
+12M 2.50 2.61 1.98 1.95 298 285 328 332 294 297<br />
ZAR 14-Jun 13.27 9.90 56.2 64.7 57.5<br />
+1M 13.13 13.27 9.95 9.94 56.8 64.7 64.8 57.1<br />
+3M 13.13 13.38 10.10 10.02 56.8 55.7 64.0 64.3 56.7 57.2<br />
+6M 12.95 13.57 10.20 10.16 57.6 54.9 64.1 63.6 57.1 56.7<br />
+12M 12.98 13.95 10.30 10.43 57.5 53.4 63.2 62.2 56.6 55.5<br />
Source: <strong>Danske</strong> <strong>Bank</strong> Markets<br />
www.danskebank.com/CI<br />
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Disclosures<br />
This research report has been prepared by <strong>Danske</strong> <strong>Bank</strong> Markets, a division of <strong>Danske</strong> <strong>Bank</strong> A/S (‘<strong>Danske</strong> <strong>Bank</strong>’). The authors of this research report are Kasper<br />
Kirkegaard (Senior Analyst), Stefan Mellin (Senior Analyst), Stanislava Pravdová-Nielsen (Analyst), Morten Helt (Senior Analyst), Lars Christensen (Chief Analyst)<br />
Christin Tuxen (Senior Analyst) and Vladimir Miklashevsky (Analyst).<br />
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www.danskebank.com/CI<br />
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www.danskebank.com/CI<br />
34