The economic backdrop due to the COVID-19 crisis and energy price collapse has entailed a steep fiscal stimulus impulse. Analysts at Danske Bank expect a continued strengthening of the NOK, with the EUR/NOK pair at 10.30 in 12 months.
In contrast, TD Securities’ analysts believe a test of 11.10 could be a-going
Key quotes
“Analysis by the NB has indicated a skepticism towards negative rates and a preference for liquidity/credit measures supplementing the large fiscal muscle whenever rates have been cut to the zero lower bound.”
“The extensive fiscal spending (almost NOK250bn) is funded via the oil fund, which entails a direct 1:1 buying of NOK and selling of FX. This turns the underlying capital flows in favour of the NOK, which, along with a stabilisation in physical energy demand as economies gradually reopen, leads us to expect a continued strengthening of the NOK.”
“We forecast EUR/NOK at 10.90 in 1M, 10.80 in 3M, 10.50 in 6M, and 10.30 in 12M.”
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