The latest developments in the Middle East will understandably dictate price action in financial markets at the start of this week, said MUFG.

It follows a heavy schedule of central bank updates last week, wrote the bank in a note to clients. The Scandinavian central banks with Norway's ,Norges Bank were more active than expected, contributing to weaker local currencies alongside the broader the deterioration in global investor risk sentiment.

Sweden's Riksbank cut rates but a further 25bps after temporarily pausing its easing cycle earlier this year, and left the door open to another cut before year-end end which would lower the policy rate to 1.75%.

More surprising was the Norges Bank's decision to start its easing cycle a little earlier than expected and it signalled that it plans to cut rates potentially two more times by the end of this year, stated MUFG.

The Riksbank acknowledged that the economic recovery in Sweden is proceeding more slowly than expected and it expects the "substantial" uncertainty to hamper the recovery in the near term.

The Norges Bank's decision to start rate cuts sooner was driven more by evidence of softer underlying inflation than expected in Norway. The dovish policy updates leave Norway's krone (NOK) and Sweden's krona (SEK) vulnerable to further weakness in the near term, added MUFG.