The euro has pulled back against the Norwegian Krone, after having peaked at 11.17 earlier in September, and, according to the Rabobank FX analysis team, it might go somewhat lower over the next months.
Key quotes
“The downturn suffered by the Norwegian economy in the first part of this year was not severe as most of its neighbours. Norges Bank data puts the domestic 2020 Q1 and Q2 GDP contractions at -2.2% q/q and -6.3% q/q respectively compared with +0.2% q/q and -8.3% q/q in Sweden and -3.7% q/q and -11.8% q/q in the Eurozone.”
“Part of the market’s relative optimism for the Norwegian economy is the ability of the government to dip further into the nation’s wealth fund to boost fiscal spending. The recent budget suggests that Solberg’s government plans to use NOK313.4 bln of ‘oil money’ to plug the deficit in state finances next year. This is lower than the amount used in 2020 but still above recent averages.”
“With EUR/NOK trading well above historical averages and so adding to policy accommodation it does seem possible that the Norges Bank could raise rates ahead of the pack and before the end of next year. In the near-term, oil prices will remain an influence for the NOK, though with relatively better economic fundamentals compared with its neighbours we see scope for EUR/NOK to pull back to 10.80 on a 3-month view.”
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