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Kristoffer Lomholt, Senior Analyst at Danske Bank, expects the Norwegian Krone to gather extra traction in the next months.

Key Quotes

“The summer period has contributed to keeping the NOK weak, as thin liquidity and profit taking by foreign investors have acted as NOK headwinds”.

“Meanwhile, we still believe in NOK appreciation over coming months and to us Norges Bank initiating its hiking cycle marks an important fundamental trigger for sending the overvalued EUR/NOK the next leg lower. Indeed, if we do not see this appreciation, it would argue for even faster rate hikes (see overleaf), which we would expect to support the NOK in the absence of external shocks. In addition, normalising liquidity should act as a NOK supportive factor in coming weeks”.

“We leave our forecast profile unchanged and target EUR/NOK at 9.40 in 1M, 9.20 in 3M, 9.20 in 6M and 9.10 in 12M”.