NEWS / Foreign Exchange

Focus on the housing prices in the US

Fundamental highlights this week

The US: existing home sales - Wednesday

• Existing home sales have fallen by 24% since the end of 2005.

• There are a number of indicators of a further fall in home sales in September.

• The pending home sales index, which usually lags home sales by 1-2 months, fell sharply in August. This indicates that home sales will fall to slightly above 5m over the next two months.

The euro zone: PMI service and industry ??“ Wednesday

• PMI for the manufacturing industry topped in summer 2006 at 57.6, but has since then fallen gradually to 53.2 in September.

• We expect a further fall to the level around 50-52 during the coming months before stabilising at a level to our growth expectations of 2% for 2008.

Germany: Ifo ??“ Thursday

• Ifo has fallen for the past four months, but is still very highIfo has fallen for the past four months, but is still very high.

• too high in view of the growth prospects.Too high in view of the growth prospects.

• Therefore we expect Ifo to fall again in October.

Expected Exchange Rates

United States Dollar EUR/USD USD/DKK

• In the past week we have seen USD weakening against EUR once again.

• Falling yields have triggered the recent fall in USD. The fall in yields was largely due to disappointing financial statements from among others Citigroup and Bank of America.

• Volatility has increased on comments from the G7 meeting this weekend.

• EUR/USD is currently testing a longterm line of resistance, and if the cross rate breaches this level, we may see the pair reaching 145.

Great Britain Pound EUR/GBP GBP/DKK

• The movements in the exchange rate have been rather limited since last week.

• Momentum and technical indicators point towards sideways range trading in the coming week.

• Nationwide house prices from October are released on Wednesday.

• The rate hikes by the Bank of England have had relatively limited effects on retail sales which remain strong.

Japanese Yen EUR/JPY JPY/DKK

• The al important theme in the financial markets is unwinding of carry trades.

• No specific comments were made on the weak JPY at this weekend??™s G7 meeting.

• However, investors are worried that a new outbreak of risk aversion is waiting around the corner and focus is on the sentiment in the equity markets

• We find it highly likely that unwinding of risk will be one of the predominant themes this week, and we maintain our current recommendation to SELL EUR/JPY.

Swiss Franc EUR/CHF CHF/DKK

• CHF has strengthened over the past week in line with other funding currencies ??“ including JPY.

• As it was the case with JPY we expect CHF to be affected by the fear of risk aversion and unwinding of carry trades this week.

• Hence we maintain our short position in EUR/CHF.

Norwegian Krone EUR/NOK NOK/DKK

• NOK has been supported by rising oil prices for a while now.

• EUR/NOK has, however, been trading sideways within a very narrow range over the past couple of weeks.

• Oil prices have maintained the course towards higher levels but recently there have been no spill-over effects on NOK.

• We believe that the potential for the oil price is to the downside at the moment, and we believe that sliding oil prices will eventually lead to a weaker NOK.

• We therefore maintain our recommendation to BUY EUR/NOK.

Swedish Krona EUR/SEK SEK/DKK

• SEK is to a great extent affected by the sentiment in the equity markets which has been adversely affected by disappointing Q3 results from some of the large US banks.

• We believe that sentiment in the equity markets will continue to play an important role for SEK this week where no important macroeconomic figures are released.

• We believe that SEK will weaken further in the short term and maintain our long position in EUR/SEK.