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FX Crossroads

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On G7, SWFs, GBP/NOK and AUD/NZD

Thu, Feb 7 2008, 11:10 GMT
by Danske Research Team

Danske Bank A/S


Summary and conclusions

  • • We do not expect this week’s G7 meeting to result in significant market changes. However, a shift in the stance in the CNY may be forthcoming.
  • • In the first in a series of articles on sovereign wealth funds (SWF) we of-fer a guide to the size of the funds and to the origination of the assets. Future articles will consider the expected growth of the funds as well as the implications for financial markets.
  • • We recommend selling GBP/NOK. We foresee serious challenges for the UK economy, and expect the BoE to be forced to cut faster than cur-rently anticipated in the markets, on the back of deteriorating domestic conditions and despite inflationary pressures. In contrast, we remain relatively bullish on the Norwegian economy and expect NB will raise rates again during the spring.
  • • Australia raised rates as expected this week, but the RBA hawkish stance suggests that the peak in the policy cycle has yet to be reached and with it the cyclical turning point for AUD. To benefit from relative AUD strength, we recommend buying AUD/NZD spot.
  • • For our thoughts on the outlook for G10 currencies and financial mar-kets, please see FX forecast update: It’s a L-U-V thing.
  • • FX Crossroads is published every second Wednesday. Next publication date is 20 February 2008.

      Published on  Thu, Feb 7 2008, 11:14 GMT


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