EUR/NOK: Hard to see a catalyst for a stronger krone – Danske Bank

In the near-term, economists at Danske Bank believe that the Norwegian krone could find some support from higher NOK rates as Norges Bank initiates its hiking cycle. However, they still see the balance of risk skewed towards a weaker NOK in the medium to long term. 

Potential for near-term temporary NOK support

“NOK could find some near-term support from higher NOK rates as NB initiates its hiking cycle. That said, we still struggle to see a catalyst for a much stronger NOK and still see the balance of risk skewed towards a weaker NOK in the medium to long-term.” 

“We now forecast the cross at 10.30 in 1M (unchanged), 10.40 in 3M (unchanged), 10.60 in 6M (unchanged) and 10.50 in 12M (unchanged).”

“The biggest risk factors to our forecasts lie in the global reflation theme and thereby not least USD real rates, risk appetite, oil and delta/vaccine-news. Better news and/or a more patient Fed than in our baseline would support reflation underpinning a stronger NOK. On the other hand, marked risk-off could trigger a larger-than-projected setback.”