Market overview

Peak expansion

As expected, markets have moved closer to our expectation of peak expansion and peak easy liquidity with momentum in global manufacturing growth slowing. Combined with the boost from stimulus fading, supply chain bottlenecks hampering production and the delta variant creating headwinds for the global economy, the risk of high inflation becoming more persistent and thus leading to stagflation has risen. The Fed was more hawkish than anticipated at the September meeting supporting our call that the Fed is about to start a tightening cy cle including both tapering and rate hikes. With the increasing likelihood of Chinese real estate developer Evergrande defaulting the Chinese credit market is showing deterioration in investor confidence adding to souring Asian sentiment with spill-over to global markets. The European gas market is under immense pressure due to supply shortage and rising demand pushing up natural gas and electricity prices.

Scandi-clouds in the horizon

The increasingly hawkish stance from the Fed continues to support our expectation of a stronger dollar and weaker Scandinavian currencies in H2. However, NOK has recently experienced a rally supported by Norges Bank initiating its hiking cycle raising policy rates by 25bp driving EUR/NOK below the 10.10 mark. EUR/SEK has also moved lower, but continues to trade in the recent 10.15-10.25 range. As expected, EUR/GBP has moved down to 0.85 since our last up date and has traded very narrowly within the 0.85-0.86 range.

We lower our profile on EUR/USD to target 1.10-1.15 in a year in favour of USD strength, as we expect further move towards a tightening of global liquidity conditions, lower PMIs, peak inflation concerns and further recovery in US jobs. We expect both EUR/SEK and EUR/NOK will move higher from here targeting 10.50 in 12M. EUR/GBP is expected to move down to 0.83 in 12M .

Download The Full Market Guide


This publication has been prepared by Danske Bank for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Bank's research analysts are not permitted to invest in securities under coverage in their research sector.
This publication is not intended for private customers in the UK or any person in the US. Danske Bank A/S is regulated by the FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange.
Copyright () Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.

Feed news

Latest Forex Analysis

Latest Forex Analysis

Editors’ Picks

EUR/USD jumps to three-week highs near 1.1650 amid falling dollar, yields

EUR/USD is trading close to 1.1650, recovering ground to clinch three-week highs. The pair cheers risk-on mood-led decline in the US dollar. Treasury yields pullback, as poor US industrial data tempers hawkish Fed’s expectations. Focus on ECB and Fedspeak.


GBP/USD extends rally beyond 1.3800 on USD selloff

GBP/USD extended its rally in the European trading hours and reached its strongest level in a month above 1.3800. The broad-based selling pressure surrounding the greenback and the BoE rate hike expectations ahead of UK CPI data fuel the pair's upside.


XAU/USD targets $1791 on turnaround Tuesday

Gold price jumps 1% as the US dollar keeps losing ground across the board. Retreat in Treasury yields, risk-on mood aid the rebound in gold price. 

Gold News

Bitcoin open interest skyrockets as investors prepare for BTC price at $250,000

The open interest of Binance and CME Bitcoin futures hit a record high of $9.2 billion when combined. Bitcoin investment products saw an inflow of over $70 million last week, ahead of the ETF approval by the SEC.

Read more

Netflix (NFLX): Will Q3 earnings after the close be enough?

Netflix (NFLX) shares continued to perform strongly on Monday with results just around the corner. The stock has been very strong for some time, setting new all-time highs on the back of the global success of Squid Game.

Read more