EUR/NOK set to drop towards 9.80 in the next 12 months – Rabobank
|The NOK is the second best performing G10 currency in the year to date after the CAD. There are a couple of obvious similarities between the two currencies. Both sustain links with the oil price and both are linked to central banks that have projected a fairly hawkish policy stance. While it is still likely to be a while before the BoC hikes rates, the Norges Bank has indicated that a rate hike is likely in H2 this year. Therefore, Jane Foley, Senior FX Strategist at Rabobank, expects the krona to see a mild appreciation against the euro.
Expansionary monetary policy stance will contribute to pushing up price and wage inflation further out
“The Norges Bank’s guidance is that the policy rate will ‘most likely be raised in the latter half of 2021’. That said, Olsen is concerned about raising rates too quickly. Firstly, this may have a negative implication for the recovery in employment. Secondly, it could result in a too fast appreciation in the value of the NOK, which could have repercussions for exporters and as well as for inflation.”
“While Norway may be on track to be the first G10 economy to experience a post pandemic rise in interest rates, a note of caution is still very detectable in the rhetoric from the Norges Bank. Based on the weaker Q1 GDP data and the Norges Bank’s own projections that much of the current inflationary pressures are ‘transitory’ and a consequence of the sharp drop in the value of the NOK last spring, policy-makers could hold off until the end of this year before hiking rates.”
“Since a lot of news regarding Norges policy is already in the price, we see scope for only a gentle appreciation in the value of the NOK vs. the EUR.”
“Our 12-month forecast is EUR/NOK 9.80.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.