19 Jun 2015
EUR/NOK at 8.25, Norges Bank on hold – Danske Bank
FXStreet (Edinburgh) - Allan von Mehren, Chief Analyst at Danske Bank, expects the Norges Bank to refrain from easing further in H2 and sees NOK picking up pace.
Key Quotes
“After the dust has settled we estimate (since there is no OIS market in Norway) that markets currently price in more than 25bp worth of cuts in H2, which in our view is too dovish”.
“We expect domestic growth to do better than projected by NB and we stick to our view that rates will be on hold at 1.00%”.
“While the very short-term risks point to the upside as markets find their feet again, we still expect a stronger NOK (this is also in line with NB’s own NOK projection)”.
“We do not expect Norges Bank to cut rates further post today’s decision and consequently expect relative rates to send EUR/NOK lower in the coming 6M as markets re-price NB. In addition, our call for a higher oil price together with ECB QE should also contribute to sending the cross lower towards our 6M target of 8.25”.
Key Quotes
“After the dust has settled we estimate (since there is no OIS market in Norway) that markets currently price in more than 25bp worth of cuts in H2, which in our view is too dovish”.
“We expect domestic growth to do better than projected by NB and we stick to our view that rates will be on hold at 1.00%”.
“While the very short-term risks point to the upside as markets find their feet again, we still expect a stronger NOK (this is also in line with NB’s own NOK projection)”.
“We do not expect Norges Bank to cut rates further post today’s decision and consequently expect relative rates to send EUR/NOK lower in the coming 6M as markets re-price NB. In addition, our call for a higher oil price together with ECB QE should also contribute to sending the cross lower towards our 6M target of 8.25”.