NOK: Strong but vulnerable to softer CPI – ING
|ING’s Francesco Pesole highlights that the Norwegian Krone has rallied on a sharp CPI surprise and markets pricing out Norges Bank cuts for 2026. He views this as premature, expecting a return of inflation towards 3.0% and renewed rate-cut expectations by summer. For now, fair EUR/NOK valuation and attractive domestic rates support NOK, especially if risk sentiment stabilises.
Krone supported by rates and valuation
"The Norwegian krone had a very strong week before the equity selloff caused a partial correction yesterday. The big jump in Norwegian CPI (January data, released on Tuesday) has prompted markets to price out any rate cut by Norges Bank this year. We think this is a premature move."
"Inflation has proven to be rather volatile, and if the next months see a return to 3.0%, a rate cut this summer should become the baseline again."
"But from an FX perspective, it is tricky to turn against NOK’s strength just yet. Unlike the rather cheap EUR/SEK, our short-term valuation model says that EUR/NOK is at fair value thanks to the hawkish repricing of the NOK curve. This means that a dovish event is now needed to really dent NOK’s momentum."
"Until then, if risk sentiment stabilises, NOK can find more support on the attractive rate profile. We continue to prefer NOK over SEK in the near term."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
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