Europe: Foreign exchange outlook

The path of the British pound (GBP) is one of relative performance, softening vs. the USD while climbing against its peers in light of the Bank of England whose normalization is expected to lag the Fed's in both timing and scope. Risk for the EUR remains biased to further weakness as we look to greater divergence between the Fed and the European Central Bank, with the passing of Greece-driven uncertainty providing for a renewed focus on fundamentals. This dynamic has been most clearly evident in the value of the Swiss franc (CHF), its accelerated depreciation observed in response to the moderation in investor risk aversion. 

"We expect CHF to weaken vs. both USD and EUR throughout our forecast profile. The Swedish krona (SEK) and the Norwegian krone (NOK) are most vulnerable into year-end, and we look to their stabilization over the course of 2016," notes scotiabank.