G10 FX Week Ahead: Clearing The Blocks

 

Spot

Week ahead bias Range next week 1 month target

EUR/CHF

1.1080

Neutral 1.1040 - 1.1040 1.1200

The March Swiss National Bank meeting elicited few surprises and EUR/CHF barely budged. We are overall constructive on this cross, but feel the EUR needs to find its feet first – presumably led by some kind of improvement in its handling of the virus. The local calendar sees the March KOF as the leading indicator, (doing very well recently) and then the March CPI follows, still at a very low -0.3% YoY.

Away from Switzerland, market focus is increasingly turning its attention to events in Poland. April 13-15 will see the Polish Supreme Court rule on the CHF mortgage issue, i.e. whether Polish banks had mis-sold FX mortgages and should be made to pick up the tab. The zloty has been weakening on this, but so far there has been little suggestion that Polish banks have a large open exposure to a short CHF position.

And there is also a suggestion that any FX needs arising from this could be undertaken off-market with the relevant central banks. But a much weaker PLN would be a point of attention for EUR/CHF – against the risk of Polish demand for CHF.

NOK: All About Oil

 

Spot

Week ahead bias Range next week 1 month target

EUR/NOK

10.1140

Neutral 10.0300 - 10.2000 10.2000

Next week’s outlook for NOK is strictly tied to oil market dynamics, after the Suez emergency gave some help to the high-beta NOK in a week of uncertain risk sentiment. As discussed in the CAD section above, OPEC+ should not hike output and this may help some stabilization, although the virus-related concerns in Europe may keep being a drag in the short-term.

Domestic drivers should continue to play second fiddle for NOK next week, with only February’s retail sales in focus, but unlikely to drive a material market response. The EUR’s soft momentum should continue to keep EUR/NOK upside broadly capped for now.

SEK: Dragged Down by EU Virus Woes

 

Spot

Week ahead bias Range next week 1 month target

EUR/SEK

10.2000

Mildly Bullish 10.1700 - 10.2600 10.1000

SEK’s high correlation with EU-related sentiment has proven detrimental in the past few days, with the Krona being the worst-performing G10 currency after the battered AUD and NZD.

With EU sentiment possibly remaining subdued next week, we could see SEK continue to follow the EUR lower, especially considering the lack of possibly offsetting factors like the case of rebounding oil prices for NOK. The release of March’s economic tendency survey may will be important to gauge the state of the Swedish economy, but its impact on SEK should be short-lived and virus-related news in Europe should remain the primary driver.

On the central bank side, keep an eye on the speech by Riksbank’s Governor Stefan Ingves on Tuesday. EUR/SEK may continue to hover around the 10.200 level next week.  

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Disclosure: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any ...

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