Over the previous month, the EUR/NOK has risen. The combination of a reversal in the global industrial cycle, a stronger USD, and/or reduced inflation forecasts, according to economists at Danske Bank, will serve as headwinds for the Norwegian krone, outweighing Norges Bank’s increasing rate rise predictions.
“Despite Norges Bank signaling four rate hikes over the next 12 months, the last month has confirmed our view of a weaker NOK. The global environment is to blame for the NOK’s decline, since the’reflation narrative’ has come to a halt.”
“A combination of a global industrial cycle turn, a higher USD, and/or reduced inflation expectations frequently creates an environment in which the NOK loses.”
“In light of recent price movement, we’ve raised our 1M profile to 10.30 from 10.20), 10.40 from 10.30 in 3M, 10.60 from 10.40 in 6M, and 10.50 from 10.40 in 12M.”
“The path of global reflation, which might drive the cross lower or even higher than we pencil in, is the largest risk to our call. In the near term, keep an eye on the Fed’s recommendations.”/n
