Macro & Markets Forecast Edition: Watch OAT for EUR downside

Nordea expects the USD to remain stronger than the EUR through H1 2027, while NOK strength continues, SEK remains directionless and GBP performance hinges on the UK budget.

• EUR/USD is forecast at 1.10 at year-end, down from 1.14 previously, with a test of 1.08 in H1 2027 before recovering to 1.14 in H2 2027 and 1.20 by end-2028.
• The dollar case rests on two further Fed hikes, a current ECB policy rate of 2.50%, higher US terms of trade from energy prices and persistent unhedged flows into US mega-cap technology stocks and credit.
• France is the key European vulnerability: rising debt costs, uncertainty over the 2027 budget and the risk of a Le Pen victory are widening OAT-Bund spreads and adding a fiscal and political premium to the euro.
• Nordea expects EURNOK to fall from 10.6 to 10.50 over three months and 10.25 by summer 2027, supported by Norway’s 4.50% policy rate, a 200bp advantage over the ECB, resilient oil prices and stronger public finances.
• The previous bullish SEK view has failed after the Middle East escalation, dollar strength and US technology outperformance; the Nasdaq 100 rose 22% while the OMX and Eurostoxx gained only 1%, and the Riksbank lagged the ECB by 75bp.
• EURGBP has stayed between 0.84 and 0.87, while UK core inflation reached 2.6% year-on-year in August, GDP growth averaged 0.6% quarter-on-quarter and the 30-year gilt yield reached 6%, making the October 28 Autumn Budget the main sterling risk.

Takeaway: Nordea favors USD and NOK over EUR over the next six to nine months, but expects EUR/USD to recover later in 2027 as US inflation eases and the Fed stops hiking; a reversal in the AI investment cycle, a sharper risk-off episode or a disappointing UK budget could invalidate parts of the view.