Markets have increasingly priced in a normalisation of the economic situation. The US remains characterised by economic outperformance only supported by the outlook for further fiscal easing with the recent announcement of Biden’s infrastructure package. Blood clot concerns with regards to both the AstraZeneca and the Johnson & Johnson vaccines have worsened the outlook for an already disappointing EU vaccine roll-out compared to peers. This poses a real threat to the EU economic recovery. In China, credit and money growth has slowed further supporting the picture of policy tightening. Overall, our narrative of a strong US economy relative to EU and Asia continues.

Cyclical features of the FX market restored

The Fed faces an increasing pressure to raise rates and taper bond purchases. That leaves an outlook of higher USD real rates, which by extension diminishes the topside risk to EUR/USD. The development of EUR/USD hinges on the course of action whether verbal or rate intervention from the Fed. Commodity currencies have enjoyed a recent bounce in commodity prices, incl. oil but with the outlook for a turn in global manufacturing PMIs and a stronger USD that in our view limit the topside. Also a turn in the industrial cycle and weak domestic inflation dynamics pose a headwind for SEK. UK virus concerns and a bounce in the EUR recently brought EUR/GBP to the highest level since early March.

Recovery of the oil market to continue in H2

OPEC+ will start normalising oil output from May. We expect OPEC+ to balance the normalisation of output with the ongoing recovery in demand. Drilling activity has only slowly started to increase in the US shale oil and has not led to higher production yet. The ongoing vaccine roll out, reopening of economies and growing inflationary pressure has brightened the outlook for oil prices. OPEC+ has started normalising its oil output, which will ease the upside potential for oil prices from the sound demand backdrop. We have revised our oil price forecasts higher.

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 trims intraday gains, holds on to higher ground

The EUR/USD pair topped at 1.2177 before retreating, as the greenback remains the weakest currency across the FX board. A scarce macroeconomic calendar kept major pairs within limited intraday ranges.


GBP/USD soars to 1.41 after UK elections, US Nonfarm Payrolls

GBP/USD has hit a new three-month high just above 1.41 after the SNP failed to win a majority in Scotland and as the UK is set to extend its reopening. The dollar is still suffering from Friday's weak jobs report.


XAU/USD eyes critical resistance at $1,850

XAU/USD is rising for the fourth straight day on Monday. Next hurdle for gold is located around $1,850. A technical correction could be witnessed before the next leg up.

Gold News

ETH soars above $4,000, as BTC and XRP struggle

Bitcoin price beginning to hint at a complex topping process. Ethereum price shakes off rising wedge pattern to test new Fibonacci extension level.

More Crypto News

UK GDP Preview: Contraction to trigger correction? Sterling set for a reality check

The UK is projected to report a 1.7% contraction in the first quarter.  Optimism about a vaccine-led recovery from the second quarter onward is baked into the price. A reminder of past weakness may trigger a much-needed correction after the big breakout.

Read more