Market overview

Possibly peak inflation worries with energy crisis looming

We have seen further signs of growth slowing and inflation rising hence lifting the overall stagflation risk. While US job growth has disappointed the details reveal a rising issue with labour supply which monetary policy cannot easily solve. Hence we still expect Fed to announce tapering at the November meeting and ultimately hike rates in H2 2022. Fears connected to the Chinese property market have eased amid rising confidence that the Chinese government will eventually step in to avoid a financial crisis. However, the recent turmoil adds new downside pressure on Chinese growth, which is already under pressure. Even if natural gas prices have come lower in recent weeks the energy crisis is increasingly spreading to the oil market with prices being supported by both substitution effects and an OPEC+ reluctant to lift supply.

USD and support to commodity currencies

The 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 as well as a surge in natural gas prices. EUR/SEK has also moved lower on the back of contagion from the NOK, now trading in the 10.10-10.20 range. EUR/GBP has been more volatile lately, but continues to trade around 0.85. USD/JPY recently climbed to 113, the highest level since 2018, with a rally in oil prices and further rise in US yields as the drivers.

We lower our profile for EUR/USD to 1.10 in 12M (from 1.13) as a reflection of broader market themes increasingly turning pro-dollar: global liquidity conditions tightening, PMIs set to move lower and central banks facing rising inflation concerns. We expect both EUR/SEK and EUR/NOK to move higher from here targeting EUR/SEK at 10.50 in 12M and EUR/NOK at 10.40 in 12M. We expect EUR/GBP to move lower as the USD-positive environment is usually benefitting GBP and keep our forecast intact at 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 remains vulnerable near 1.1600 amid firmer dollar

EUR/USD is hovering around 1.1600, on the defensive amid a broadly stronger US dollar. Markets cheer US-Sino talks and stimulus progress despite looming inflation fears. The Fed-ECB monetary policy divergence weighs down on the euro. US Consumer Confidence data awaited.


GBP/USD hovers around 1.3750, Brexit talks in London eyed

GBP/USD is trading above 1.3750, struggling for a clear direction after Monday’s rebound. Market sentiment improves on stimulus hopes, US-Sino talks but the dollar remains firmer. UK’s Frost offers EU December deadline to solve the row over the NI proposal. All eyes on the Brexit talks in London.


Acceptance above 100/200-day SMAs favours XAU/USD bulls

Gold regained positive traction on Monday and inched back closer to multi-week tops. Fresh COVID-19 jitters benefitted the safe-haven metal. A stronger USD, hawkish central bank outlooks kept a lid on any meaningful upside.

Gold News

Traders book profits from Shiba Inu to push Dogecoin to $0.34

Dogecoin price could see some incoming speculative money from profit-taking in Shiba Inu A bullish close above the Cloud on the daily chart indicates future upswing likely. The outperformance of Shiba Inu is likely as Dogecoin lags the majority of the market.

Read more

Conference Board Consumer Confidence October Preview: Watch what we do... Premium

Confidence expected to slip to 108.3 from 109.3 in September. Michigan Consumer Sentiment eroded slightly in October. Sentiment seems divorced from labor market and Retail Sales. Federal Reserve taper will not hinge on a happy US consumer.

Read more