The outlook remains for the Norwegian krone to strengthen over the medium- to longer-term against the euro and greenback, according to analysts at Wells Fargo. They warn Norges Bank could be the first among G10 to hike interest rates.
Key Quotes:
“Our outlook remains for the Norwegian economic recovery to gather momentum this year as progress is made on a vaccine front, oil prices remain elevated and the negative effects from COVID dissipate. We look for real GDP to grow 3.6% in 2021, followed by 2.7% growth next year. Although not our base case, we acknowledge that there could be some downside risk to our forecast, characterized by an accelerated spread of the virus weighing on economic output, any issues with the vaccine distribution or a plunge in oil prices, similar to that seen last year.”
“On the flip side, we could see the pace of Norwegian krone appreciation quicken as rate hikes could be supportive of the krone if other central banks remain on hold, and as vaccinations become more widely available.”
“We expect the Norwegian currency to benefit as the global economy also recovers and vaccination availability increases, in addition to broader U.S. dollar softness. Overall, we look for the EUR/NOK exchange rate to reach NOK10.1500 by Q2-2022.”
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