NOK to strengthen during the next couple of years – Nordea


Higher oil prices and the expected rate hikes from Norges Bank will be positive for NOK down the road. Hence, economists at Nordea see further downside in EUR/NOK. However, they now expect a slightly stronger dollar ahead and see USD/NOK about sideways going forward.

Key quotes

“Higher oil prices should lead to a stronger NOK ahead. As the global recovery continues, oil demand will rise and oil inventories will fall further. Lower inventories will open the path for even higher oil prices – and in turn a stronger NOK.”

“Norges Bank will provide additional support to NOK down the road. Given a faster vaccine roll-out and much higher oil prices than expected, the outlook for the Norwegian economy has improved. We expect Norges Bank to revise up its rate path further and signal the first-rate hike before the end of this year. A higher rate spread relative to other G10 currencies will give additional support to NOK down the road.”

“We see further downside in EUR/NOK. Given the outlook for both rates and oil prices longer out, we actually believe there is a good chance the cross could come below 10.00 before the summer. Our short-term view is at risk if we get a correction in equity markets. However, EUR/NOK should trade below 10.00 later this year.”

“We expect USD/NOK to move sideways as we believe the USD will also strengthen. Relative growth, relative inflation and relative central banking policy all favour the USD against EUR. We therefore now believe the USD will strengthen rather than weaken in 2021.”

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