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Near-term, NOK remains supported by OPEC+, reopenings, Norges Bank’s NOK buying and the Fed support to reflation sensitive assets including the krone. Economists at Danske Bank forecast EUR/NOK at 10.00 in   one month. As all these drivers are set to lose steam over the next   three months, they remain (modestly) bearish on a medium to long-term horizon and forecast EUR/NOK at 10.30 in 12 months.

Key quotes

“The Norges Bank rate path indicates an almost 50/50 probability split between December and September (we stick to September). The rate path also indicates 5 ½ hikes by end-2024. While higher NOK rates in isolation is supportive of a stronger NOK we still highlight that relative short-end rates are an inferior driver of NOK relative to the global reflation theme.”

“Near-term, we expect NOK to remain supported by reopening prospects, NB’s NOK buying and a data following (not anticipating) Fed, which implicitly supports reflation sensitive assets incl. NOK. That said, we think all of these drivers are set to lose steam over the next three months.”  

“In light of the recent OPEC surprise, we lower our EUR/NOK one-month forecast to 10.00 (from 10.10) but leave the rest of the profile unchanged. Hence, we maintain our medium to long-term (modestly) bearish view on NOK.”