EUR/NOK consolidative ahead of CPI – Danske Bank

Christin Tuxen, Chief Analyst at Danske Bank, believes the cross could attempt a sideline theme ahead of relevant inflation figures in Norway due tomorrow.

Key Quotes

“The sudden NOK rally initiated late in the US session on Monday – seemingly on no fundamental drivers apart from a modest rebound in the oil price - led to a break of the support trend line from the July bottom”.

“In isolation that’s a bearish signal for EUR/NOK, challenging our patience in awaiting a break above 9.40 before re-selling the cross”.

“Our fundamental predisposition is to sell EUR/NOK but from current levels we do not like the near-term risk/reward. We expect the cross to continue to range trade going into the Norwegian July inflation release on Thursday, which is inherently linked to uncertainty”.

“Bloomberg consensus estimates for the core measure range all the way from 0.9% y/y to 1.6% y/y. Our own forecast for Thursday’s print is 1.2% y/y which would be above Norges Bank’s expectation. Meanwhile, with the latest appreciation, the NOK is now 2% stronger than NB’s last I44 projection which historically would be enough to cancel the positive effect on the rate path from higher inflation. The next NB meeting is not until 21 September”.