2018-2019 Forecasts For Euro, Pound, US Dollar, Norwegian Krone, Swiss Franc And Yen (EUR/USD, EUR/GBP, GBP/USD, EUR/NOK, USD/JPY)

Here's a currency forecast roundup from the Exchange Rate Research Team covering the EUR/USD, EUR/NOK, GBP/USD, EUR/GBP, USD/JPY crosses from Lloyds, Danske Bank and JP Morgan.

Danske Bank: EUR/USD faces possible slide near-term

The Euro sold off against a firmer Dollar on Tuesday, dragging GBP/USD down with it in a generally more encouraging environment. Italian inflation disappointed once again, demonstrating how stubborn price pressure is in Europe and leaving the common currency vulnerable to any further evidence that growth is slowing. Analysts at Danske Bank anticipate that spot could face further pressure as US equities outperform and the US economy proves more robust in growth dampening risk off,

“We increasingly see the risk of a possible slide within EUR/USD’s recent range near term. Notably, our equity strategists are looking for the US to outperform the eurozone near term as the US is off to a good start in terms of the earnings season. This could foster inflows into the US and out of the eurozone short term – not least given that the US so far had fared notably better amid the global loss of growth momentum than Europe”

ING: Sterling, “the comeback kid”

Cable took a breather on Tuesday ahead of critical inflation data as the pair failed to make it 8 days straight of green candles. A stronger Dollar was the order of the day rather than a weak Pound, but Sterling did slip later on as EUR/GBP also came off its lows in what appeared to be a little profit-taking ahead of CPI. Forex strategists at ING believe that Data will continue to dictate the path of the Pound, while speculating if Cable will overshoot their 1.45 target,

“GBP/USD is at its highest level since the Brexit vote – buoyed by seasonal trends, the anticipation of a May BoE rate hike and a politically weak US dollar. As we noted last week, it seems that we’re back to good old-fashioned UK data watching to determine the short-term direction for the currency. A 3% wage growth print in today’s UK jobs report should seal the deal for a May BoE hike – but it may be the activity data that holds the key to the pace of BoE policy normalisation and GBP’s cyclical re-pricing (ie, how far GBP/USD moves above our 2Q target of 1.45).”

Danske Bank: Take profit on NOK/SEK, Sell EUR/NOK at top of range

The Swedish Krona strengthened lightly once more as reduced fears over a trade war continued to provide support to SEK. Sweden has been identified as one of the economies which has the most to lose in a trade war environment and so investors have turned a little cold towards Swedish assets. Danske Bank believe there are now downside risks to NOK/SEK as the oversold Krona corrects, while they also see a short opportunity in EUR/NOK,

“Near-term downside risks to NOK/SEK, we stressed that NOK/SEK has come a long way and we took profit on our long NOK/SEK recommendation from our top trades… Take profit on long NOK/SEK. EUR/NOK is now at low end of its recent trading range and indeed we still see the cross as a 9.47-9.75 range play near term; we would look to re-sell the cross at the top of the range on strategic attractiveness.

Furthermore, EUR/SEK looks prone for at least a temporary correction albeit it is in our view still too early to turn strategically positive on the SEK. That said, our fundamental predisposition is to re-buy NOK/SEK on dips.”

J.P Morgan: US Dollar may struggle against Yen and CHF

The USD Index had a better day again on Tuesday, as it rallied erasing a good chunk of its losses from Monday where it was noticeably weak in risk-on conditions. Positive housing data was good news for the Greenback, but several obstacles still remain and a flurry of lawsuits against the US President are not helping matters for the Dollar. Forex strategists at J.P Morgan believe that the US being later in its tightening cycle means it may find other currencies like the Euro, CHF and Yen gaining on it in periods of trouble if trade conflict returns,

“The US is relatively late in its tightening cycle—rates have now climbed approximately halfway to their projected long-term equilibrium of 3 percent. Meanwhile, Europe and Japan are still very early in their tightening cycles, giving the euro and yen significant upside potential against the dollar in the medium term.

Political uncertainty and trade tensions may also contribute to the dollar’s weakness. The Trump administration has imposed tariffs on imported steel and aluminium, as well as penalties on Chinese imports. Although the current set of tariffs is relatively limited in scope, the threat of escalation may create a risk premium for the dollar. A broader trade conflict would likely push the dollar down against competing reserve currencies like the euro, yen and Swiss franc.”