EUR/NOK pushes lower as Norges Bank stands alone in the hawkish camp – TDS

Economists at TD Securities look for EUR/NOK to test recent lows around 10.43 in the wake of the Norges Bank decision which kept its policy rate on hold at 0.0%, but upgraded its policy rate projections, to see rate hikes beginning around Q4 2022. 

Key quotes

“The Norges Bank surprised no one this morning in leaving its policy rate on hold at 0.0%. However, it did surprise on the hawkish side with an upward revision to its policy rate forecasts compared to the May MPR Update. In May, the Norges Bank saw its policy rate remaining a zero until at least the end of its projection horizon in Q4 2023. But it now sees rate hikes beginning around Q4 2022, with 3 full rate hikes by the end of 2023.” 

“Looking at the macro forecasts, the picture was a bit more upbeat compared to the May MPR Update, with 2020 GDP growth revised from -5.2% to -3.5%, and 2021 from +3.0% to +3.7%. So the Norges Bank isn't just looking for the trough in Q2 GDP growth to not be quite as deep, but it's looking for a faster recovery into 2021 as well.”

“EUR/NOK pushed lower through near-term support around 10.68. This puts a test of the recovery lows around 10.43 established earlier this month into view. A move below there, however, will need to see continued progress on the global economic recovery.”