NOK seen stronger in H2 – Danske Bank

Kristoffer Lomholt, Senior Analyst at Danske Bank, expects NOK to edge higher in the second half of the year.

Key Quotes

“Our risk scenario for the NOK has played out as a much improved domestic story has been dominated by global commodity weakness weighing on G10 commodity currencies in a remarkably synchronised move (see overleaf). Going forward, it is difficult to identify any imminent triggers for a NOK turnaround as global business cycle weakness will remain a NOK challenge, while NB is unlikely to turn hawkish in June. Also, we think the latest oil price rise reflects that markets have once again close-to-fully priced in an extension of an OPEC output freeze agreement”.

“The Norwegian normalisation story, valuation and real rates remain clear NOK positives but the positive effects will likely be that of a H2 17 story. In the near term, a turn in the European cycle limits the EUR/NOK upside potential. We lift our EUR/NOK forecasts to 9.30 in 1M (from 9.00), 9.30 in 3M (8.90), 9.10 in 6M (8.70) and 9.00 in 12M (8.70)”.