Nordic large corporates re-think risk and supply chains in a harsher new reality
At a Glance
As Nordic firms grapple with a transforming geopolitical landscape, the desk views this as a decisive moment for FX traders to reassess risk management strategies. Per the full note from Nordea, a recent study of 160 large corporations reveals significant concerns about supply chain vulnerabilities and exposure to geopolitical risks, particularly regarding Russia and China. This evolving sentiment among large corporates illustrates the broader implications for currency volatility and hedging practices. These companies are particularly sensitive to the shifting dynamics around inflation and interest rates, indicating that strategic adjustments will likely underpin FX exposures moving forward.
Key Takeaways
- 01Nordic corporates are rethinking supply chain risks amid geopolitical tensions.
- 02Exposure to Russia and China is a significant concern for firms, leading to de-globalization.
- 03Inflation and rising interest rates are prompting changes in hedging strategies.
- 04Strategic adjustments in risk management could reshape FX market dynamics.
Full Analysis
What the desk is arguing
The desk highlights that Nordic corporations are reevaluating their risk frameworks amid rising geopolitical tensions and economic instability. Per the full note from Nordea, concerns over supply chain dependencies, specifically those linked to Russia and China, are prompting firms to de-globalize their operations.
Further, the survey suggests that increases in inflation and interest rates are compelling corporates to alter their hedging strategies for commodity, FX, and interest rate risks. This reevaluation signals a broader shift in corporate treasury practices that could significantly influence currency markets over the next few years.
Where it sits in our coverage
Our consensus target for the EUR/USD is 1.075, with a range between 1.04 and 1.12. Currently, the jpmorgan target is 1.10 for March 2026, while bofa has a more conservative target of 1.04.
This view aligns with jpmorgan’s assessment but sits higher than bofa’s more pessimistic outlook, indicating a divergence in expectations surrounding the Eurozone's economic recovery compared to that of the US.
How other firms see it
jpmorgan and other aligned firms are positioning for a moderate recovery in the EUR/USD, factoring in the changing risk perceptions among Nordic corporates. Conversely, bofa maintains a cautious stance that reflects a strong dollar environment and potential recessive pressures.
With significant corporate exposures shifting, it will be essential to monitor closely how this affects the EUR/USD trajectory. Additionally, watch commodity prices as shifts in supply chain anxieties may prompt further volatility in FX pairs linked to the Eurozone.
Market Implications
Traders should watch for shifts in the EUR/USD amid corporate realignments toward risk management strategies. Key levels to monitor include the consensus target of 1.075, which may act as a pivot point in response to changing corporate sentiments.
From the original
Podcast Nordic large corporates re-think risk and supply chains in a harsher new reality 21-10-2022 In Nordea Thematics annual treasury study, 160 Nordic large corporates have answered questions about what they consider to be the greatest risks and how they manage them. Johan Tro
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