GBP outperformance among European G10 FX to continue – Nomura

By FXStreet FXStreet (Delhi) – Research Team at Nomura, suggests that an earlier Fed lift-off and a more dovish ECB stance will benefit GBP the most.

Key Quotes

“UK yields will react more to US yield rises (hence spread widens less), while GBP will react less to USD appreciation. In addition, the ECB’s renewed dovish stance will help GBP outperformance for three reasons; 1) bigger pressures on the Riksbank and SNB to follow the ECB, 2) re-acceleration in euro area investors’ foreign bond investment, and 3) the positive impact on risk sentiment. Although the BoE recently disappointed GBP bulls, we keep targeting 0.69 by end-2015 and 0.65 by end-2016 in our EURGBP forecast.”

“In the near term, the ECB’s dovish stance may put more downside pressure on SEK than CHF, as we judge the Riksbank has more easy policy options to follow the ECB than the SNB has. In the medium term, however, the inflation outlook is clearly much healthier in Sweden than in Switzerland. We expect EURCHF to appreciate gradually throughout 2016-17, with EURSEK starting to trade weakly in mid-2016. Near-term SEK weakness will give us a better entry point for SEKCHF long positions as a mid-term relative value trade.”

“NOK movement will likely continue …read more

Source:: FX Street