EUR/NOK expected to grind lower in the next months – Danske Bank

In opinion of analysts at Danske Bank, the Norwegian currency is expected to gain traction in the next months.

Key Quotes

“As expected, Norges Bank kept rates unchanged at the December meeting while maintaining a neutral bias in the statement. We think the bar for more monetary easing has become high in Norway, especially given the housing market situation in Oslo”.

“A hike, however, also seems far away given the outlook of still only moderately higher output growth, falling inflation and lower-than-expected wage growth outlook”.

“We still expect EUR/NOK to move lower next year, as normalising growth and real interest rates, higher oil prices and valuation forces all point to a lower cross in 2017”.

“Near term, however, we see a risk of markets overreacting to OPEC headlines, which together with markets digesting a more hawkish Fed and year-end seasonality, could prove to be near-term headwinds”.

“In light of the recent rise in oil prices, we lower our 1M and 3M forecasts to 9.10 (both from 9.20), but leave our 6M and 12M forecasts unchanged at 9.00 and 8.80, respectively”.