−We have been arguing that EUR/USD would hit 1.27 this autumn based on a more aggressive approach from the ECB to deal with the eurozone debt crisis and the Fed engaging in a new round of QE3. Hence, we recommend to keep a very close eye on the FOMC minutes that could give important clues whether the fed will actually embark on QE3 or not. However, ahead of the FOMC meeting the FX market will closely follow the situation in Spain and Greece. Especially the latter has the potential to derail the latest euro-optimism ahead of the talks between EU leaders and Greece this week. Juncker, Head of Eurogroup, visits Athens today to listen to a Greek request for a two-year extension of the country’s fiscal-adjustment programme. Yesterday, there were conciliatory comments from German government officials, indicating that Germany may be willing to reconsider the timescale as long as Samaras’ government shows willingness.
−The Norwegian unemployment rate came in as expected at 3.0% this morning, but the numbers showed clear signs that growth in employment is in decline. To be sure, this follows strong growth during the spring, so the annual growth rate is still 2.2%. The numbers hardly change the picture for Norges Bank, and the market reaction will likely be muted, but the numbers are still a bit on the weak side. The technical outlook is still for a lower EUR/NOK. Strong support is seen at 7.25
−Riksbank member Kerstin af Jochnick's speech yesterday at a seminar at Danske Markets was a tad dovish. Not least since her SEK comments contrasted to what fellow Board member Jansson was reported as saying the day before. She emphasized that the faster-than-expected appreciation of the krona will be taken into account but she guarded herself by saying it was not sure a rate cut would have any impact on the krona since there are other forces driving the krona (too). We stick to our call that the Riksbank will stay on hold at the next policy meeting, but perhaps a bigger probability of a cut should be priced. The latter might weigh on the SEK short-term. We recommend to sell EUR/SEK on up-ticks.
