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EUR/NOK currently trades around 10.35, after reaching a new post-corona low of 10.15 last Monday. It’s going to take a higher rate spread against G10 currencies (USD) and higher oil prices for the pair to continue down. This will take some time, so expect EUR/NOK about sideways in the near-term. But the cross could reach 10.00 before the summer, economists at Nordea brief.

Key quotes

“When it comes to spot prices, Brent around $65/bl is probably where we will trade in the near term – with more upside longer out. For NOK, this means there is probably limited upside from oil in the near-term. With oil prices at $65/bl., EUR/NOK should have come down towards 10.00.” 

“What happens to US rates matters for NOK. The last time NOK and oil disconnected was during the period 2017 to mid-2019. We see Norwegian 2Y swap rates at the top in G10 but we probably need an even higher rate spread to compensate investors using NOK as a long currency in carry trades. So what Norges Bank does will be important for NOK ahead.”

“ We believe the Norges Bank will become even more hawkish in March and that they will signal a first rate hike before the end of this year. Such signals from Norges Bank will give additional support to NOK down the road.” 


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