EUR/NOK still expected to grind lower – Danske Bank

Sverre Holbek, Senior Analyst at Danske Bank, remains bullish on the Norwegian Krone and sees the cross trading lower in the next months.

Key Quotes

“Tuesday’s strong Regional Network Survey in Norway clearly reduced the downside risk for the economy, making Norges Bank’s rate path communication challenge next week much easier”.

“Norway is now facing accelerating growth and a narrowing output gap, which would usually be supportive for an undervalued currency like the NOK”.

“However, external developments seem to have become more challenging for the risk-sensitive NOK, with waning global risk appetite and an earlier-than-expected tightening of US financial conditions”.

“This leaves the NOK in an odd position, with domestic support but external headwinds. For now, we maintain our short EUR/NOK position and expect a dovish ECB message today to weigh on the pair”.