- EUR/NOK gathers further downside traction near 10.6200.
- The Norges Bank left the policy rate unchanged at 0.00%.
- The central bank sees the interest rate at current levels until 2022.
The Norwegian krone is prolonging the upside momentum so far this week, dragging EUR/NOK to fresh weekly lows in the 10.62 neighbourhood.
EUR/NOK weaker post-Norges Bank
EUR/NOK is losing ground for the fifth consecutive session so far on Thursday, managing to reclaim the 10.6200 region, or multi-day lows.
The krone picked up further pace on Thursday after the Norges Bank left the key policy rate unchanged at 0.0% at its meeting. In addition, the Nordic central bank now sees the Scandinavian economy contracting 3.5% this year vs. previous forecasts for a 5.2% contraction.
The Norges Bank expects interest rates to remain at current levels over the next couple of years “followed by a gradual rise as economic conditions normalise”. The key rate path was revised, however, hinting at the likeliness of a hike cycle starting in 2022.
The positive momentum in NOK has been also sustained by the better tone in the riskier assets and the strong recovery in crude oil prices since mid-April, as the European reference Brent crude rose from $16.00 per barrel (April 22) to last week’s tops beyond the $43.00 mark (June 8).
What to look for around NOK
NOK keeps gathering traction this month on the back of the improved tone in the risk complex, including crude oil prices. In the meantime, Brent dynamics and the broader risk appetite trends, all in combination with the post-COVID economic recovery remain the key driver for NOK and its peers for the time being. On the macro scenario, the Norges Bank is seen keeping its steady stance in the next months, although a faster-than-expected recovery in Norway could encourage the central bank to abandon its neutral bias.
EUR/NOK significant levels
As of writing the cross is losing 0.31% at 10.6620 and a breach of 10.4660 (200-day SMA) would expose 10.4215 (monthly low Jun.9) and finally 10.2811 (monthly low Mar.3). On the upside, the next hurdle emerges at 10.9069 (100-day SMA) followed by 11.0191 (monthly high Jun.15) and then 11.4692 (monthly high May 4).
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