NOK/SEK to stay range-bound
Following our recent two week European and Asian road show, we are convinced many investors still regard the SEK as vulnerable in the present environment of slowing growth.
While we share their pro-cyclical concerns, we also emphasise the currency’s recently acquired defensive qualities. As regards the NOK, it is preferred based on very strong domestic fundamentals, although the expected average daily sale of NOK 1600m this month makes us more certain our bullish 1 month EUR/NOK forecast at 7.90 will be fulfilled. We expect EUR/SEK and EUR/NOK to remain well supported in coming weeks, corroborating our argument (and associated trade recommendation) favouring more range-trading in NOK/SEK. Still, both risks and the technical pattern of trading activity indicate a further move south in NOK/SEK. Page 5
Greek referendum adds to euro risk premium
With last week’s deal among Euro-zone countries including expanding the capacity of the EFSF by leveraging, a plan to recapitalize banks and a negotiation of a voluntary haircut of Greece’s privately held debt to obtain a more sustainable debt situation for Greece, we thought Euro-zone countries had taken a significant step to ring fence the most severe problems likely to render greater stability. Yesterday’s decision by the Greek Prime Minister to call for a referendum to approve the new EU bail-out agreement came as a great surprise. Although the date for the referendum remains uncertain, early next year appear as most likely. Hence, we will have to live in great uncertainty for several months as this means that much of the political efforts will come to a halt. A failure to win the referendum will probably end the help from the IMF and Euro-zone countries and cause Greece to default and that will end the Greek euro membership. The renewed uncertainty once again motivates an increased risk-premium attached to the euro which will makes us reconsider the euro forecasts in a more bearish direction. The euro may get support from the bank recapitalisation plans, a seasonal pattern for USD weakness in December and increased focus on US fiscal troubles. Page 3
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Skandinaviska Enskilda Banken AB