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Analysts at Credit Suisse still see scope for key pro-cyclical EUR crosses to move lower, targeting EUR/NOK 9.80, as fiscal FX flows are set to support the krone ahead of elections.

Limited scope for further hawkish repricing in Norway

“Resilient oil prices and still-elevated inflation prints continue to support current monetary policy expectations, but leave limited scope for further hawkish repricing. With OPEC+ starting to normalize supply starting May, and oil prices in line with Norges Bank’s estimates, the bar for further hawkish shifts in policy expectations is high. A stronger NOK should also limit upside risks in inflation, and should contribute to push CPI-ATE further lower.”

“Fiscal spending-related flows are likely to be NOK-positive in Q2. This leaves us constructive on NOK even with less potential for further supportive monetary developments. We lower our EUR/NOK target from 10.05 to 9.80.”

“Sep 2021 elections should drive fiscal spending amid slow vaccination pace and lockdown threats. Labor and Center Party pose a strong challenge to incumbent Conservatives. More fiscal spending points at sustained NOK purchases from Norges Bank on behalf of the government, a short-term NOK-supportive factor.”