UBS Revises EUR/NOK, EUR/SEK Targets Amid Risk Shifts

Key Takeaways: UBS Adjusts Krone Forecasts

UBS has updated its price targets for the EUR/NOK and EUR/SEK currency pairs, reflecting recent changes in global risk sentiment and monetary policy expectations following geopolitical developments.

Market Overview and New Targets

The investment bank set a new year-end target for EUR/NOK at 11.20 and an end-Q2 target of 10.75. For EUR/SEK, the end-Q2 target was revised to 10.85, while the year-end forecast of 10.50 remains unchanged, supported by anticipated fiscal issuance of SEK-denominated safe assets.

Economic Impact and Central Bank Policy

UBS highlighted that market expectations for 64 basis points of rate hikes from Sweden's Riksbank by year-end seem misplaced. The bank points to persistent below-target inflation, disinflation from a VAT cut on food, and a soft labor market as reasons the Riksbank is likely to hold rates steady.

Summary and Outlook

The adjustments suggest a belief that a pro-carry trading environment could further strengthen the Norwegian krone. For the Swedish krona, supportive risk sentiment is a key near-term driver, while long-term support is expected from increased supply of safe assets.

FAQ

Q: What is the new year-end target for EUR/NOK from UBS?
A: UBS adjusted the year-end EUR/NOK target to 11.20.

Q: Why does UBS doubt the market's Riksbank rate hike expectations?
A: UBS cites persistent below-target inflation and a relatively soft labor market as factors weighing against significant rate hikes by the Riksbank.

Source: Investing.com