Economists at Capital Economics forecast the Norges Bank to be the first advanced central bank to begin raising interest rates, in the second half of this year. This will further bolster the krone, which will leave the EUR/NOK pair trading at 9.50 by the end of 2021.
Key quotes
“We are now pencilling in two 25bp rate hikes in H2 this year, with the first coming at the August meeting. And the fact that the Norges Bank is not usually timid suggests that further tightening will be on the cards next year. Our new forecast is more hawkish than is currently priced into the market.”
“If we are proved correct, this would provide further support to the NOK, which we expect to be the best-performing G10 currency on the back of a wider pick-up in investor risk appetite and oil prices. We now forecast EUR/NOK to reach 9.50 by year-end, from 10.22 at present.”
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