Synopsis:

Danske maintains a bullish outlook on EUR/USD and EUR/Scandinavian crosses, forecasting a gradual EUR/USD rise toward 1.20 over 12 months amid easing tariffs, structural USD headwinds, and a global rotation out of US assets. They also expect moderate EUR gains against NOK and SEK, albeit with tempered momentum.

Key Points:

• EUR/USD Outlook:

  • Danske now targets EUR/USD at 1.20 in 12 months, driven by a combination of:

    • Easing trade tensions

    • Overstretched short-USD positioning

    • Structural US vulnerabilities: political risk, trade uncertainty, and weakening foreign investor appetite for US assets

• EUR/NOK View:

  • Maintains a mildly bullish bias, but lowers forecasts citing:

    • Exhausted NOK rally potential

    • Long-term Norwegian structural challenges:
      – OPEC+ oil output decisions
      – High labor costs reducing competitiveness

• EUR/SEK View:

  • Flat near-term, but targets a gradual rise to 11.20 over 12 months

  • Despite positive capital rotation flows into Europe, Sweden’s weak domestic growth weighs on the SEK

• Forecast Risks:

  • Upside risk: A sharper US recession and accelerated capital outflows could drive EUR/USD substantially higher than forecast.

  • Downside risk: A full reversal of Trump’s policy stance could temporarily boost confidence in USD assets, though Danske views a full recovery in sentiment as unlikely.

Conclusion:

Danske remains structurally bullish on the euro, forecasting continued EUR strength against USD, NOK, and SEK—though noting that US economic trajectory and investor rotation flows will be decisive. A sharp US slowdown would amplify EUR gains, while policy reversals could offer only modest relief to the dollar.