Europe Currencies Outlook

EURO ZONE: The euro (EUR) is entering September well off its recent highs, having relinquished its short-lived, safe-haven gains from mid-August. Turbulence in August provided for considerable volatility, driving the widest one-month range since January while forcing a considerable amount of short covering with CFTC sentiment narrowing nearly $5bn to a net short $9.5bn position as of August 25th. 

"We remain biased to fundamentally driven weakness, and hold a Q4 2015 target of 1.05", says Scotiabank.

UNITED KINGDOM: The British pound (GBP) is entering September at the lower end of its multi-month range, with its most recent round of weakness driven by concerns over relative monetary policy and the outlook for the Bank of England. Sentiment toward GBP is neutral, with CFTC positioning net long $0.3bn as of August 25th. 

"We look to moderate GBP weakness into year end, and hold an end Q4 2015 target of 1.51", notes Scotiabank.

SWITZERLAND: The Swiss franc (CHF) has completed its most volatile month since the removal of the EURCHF floor in January, its whipsaw movement the result of broader turbulence driven by concerns surrounding China and the Fed. 

"We look to further weakness and note the deterioration in sentiment with CFTC positioning highlighting a $1.7bn short CHF position as of August 25th, the most bearish level since mid-January. We hold a Q4 2014 USDCHF forecast of 1.03", added Scotiabank.

SWEDEN: The Swedish krona (SEK) continues to trade in tandem with EUR, with a notable resilience to recent volatility as a result of its robust domestic fundamentals and the Riksbank's relatively tight policy gap to the European Central Bank. SEK is expected to gain vs. EUR, with weakness against the USD.