| Market Analysis Forex - 21 09 2011 |
 Talk of the SEK and NOK becoming new safe-haven currencies rapidly receded as stop losses drove EUR/SEK and EUR/NOK higher. The more normal pattern of business cycle sensitivity now appears to be working against both. However, they should clearly be less vulnerable to major weakness as the long-term case for appreciation remains intact.Our 1 month EUR/SEK forecast is 9.10, with risk clearly on the upside during the coming week due to continuing debt worries. This morning Riksbank minutes will be released together with Q2 GDP (final) data. As regards the Riksbank we believe the board will be content to adopt a ‘wait-and-see’ approach. On Swedish growth, we observe July data were better received than suggestions made by leading indicators. Norges Bank will leave rates ‘on hold’ at 2.25% this week adding a more dovish tone. However, we disagree with market's view of a 30% probability of a rate cut. The NOK has depreciated, returning to levels at which it traded ahead of the SNB decision (which caused the NOK to appreciate 2.5% v EUR within 24 hours). Nevertheless, the NOK is again back on the central bank's ‘watch list’. |
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