Uncertain US growth trumps Greek debt concerns
EU leaders continue to discuss further financial support for Greece with, according to yesterday’s Financial Times, demands for more direct international involvement in Greek economic policy, including influence over measures for tax collection and the privatization of government assets. Moreover EU leaders are apparently discussing measures to voluntarily extend repayment periods on Greek government debt among private investors, and to impose further austerity measures. The Greek situation has once again adversely affected the euro, although the focus on the European debt crisis in recent days has been overshadowed by uncertainties regarding the momentum for US economic recovery. So far, a lackluster first quarter and mixed signals indicating a continued weak economy have raised several question marks concerning whether the US recovery is in fact self-sustaining. Disappointing ISM and later payroll data this Friday will clearly be negative for the USD as it would probably delay any change in Fed monetary policy, or even worse, raise expectations of further QE by the Fed to support the recovery. Page 3
Scandie summer seasonality
Based on historical patterns Scandinavian currencies tend to systematically underperform vs. EUR over the summer. Given exchange rate changes between the Scandinavian currencies and the euro in July over the last ten years, we note a systematic weakness in the former. However, for the EUR/NOK the same pattern does not apply to June. Nevertheless, this year may be different as we expect EUR/NOK to trade between 7.70-8.00, being currently at the lower end of the range. At the same time our short-term fair value model has begun to trend higher, currently indicating a fair value above 8.00. Further, we expect Norges Bank to increase FX purchases on behalf of Pension Fund Global, further undermining the flow outlook. Next week we present a new issue of our market survey NOK Views. Page 5
Skandinaviska Enskilda Banken AB