EUR/NOK seen at 8.70 within a year’s view – Danske Bank

Kristoffer Lomholt, Senior Analyst at Danske Bank, believes NOK could appreciate further towards the 8.70 area within a year’s view.

Key Quotes

“March marked a perfect storm for the NOK, as speculative positioning made EUR/NOK highly vulnerable to the repricing of the ECB, the oil price dropping on tighter monetary policy/OPEC comments and finally Norges Bank providing a more dovish rate path than markets had pencilled in”.

“Meanwhile, a large part of these drivers have now reversed without having the reverse positive effect on the NOK”.

“As a result, EUR/NOK now seems overvalued according to our short-term financial models. More fundamentally, accelerating above-trend growth narrowing the negative output gap is an ideal cocktail for an undervalued currency like the NOK”.

“We still expect EUR/NOK to move gradually lower and leave our forecasts unchanged, targeting 8.70 in 12M”.