EUR/NOK: Year-end forecast at 9.60 – Nordea Markets

Joachim Bernhardsen, analyst at Nordea Markets, suggests that they are lifting their EURNOK forecast as the Norges Bank has already lifted rates twice in the current tightening cycle but, this has failed to spur significant appetite for the NOK.

Key Quotes

“We advocate a rather bullish view on the Norwegian economy and argue that Norges Bank will hike rates another two times both this year and next year. Higher rates have had limited effect on the NOK so far, but our firm believe in Norges Bank is the main reason while we still forecast a stronger NOK.”

“With the carry argument absent NOK buyers are likely to remain cautious with the NOK knowing the NOK tends to weaken fast if risk sentiment sours.”

“However, as Norges Bank hike rates NOK will advance as one of the top yielders in the G-10. This should have the potential to trigger more interest in the NOK. This story takes time to unfold though. We therefore forecast limited strengthening of the NOK this year and a more pronounced strengthening next year as rates come up.”

“Our year-end forecast this year of 9.60 in EURNOK is also a reflection of the usual NOK weakness towards year-end. That means we expect to see EURNOK below 9.60 in periods, but towards year-end times are again likely to be challenging for the NOK.”

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