EUR/NOK points to 8.80 in 12-month – Danske Bank

Analyst Kristoffer Lomholt at Danske Bank expects the Norwegian currency to gather traction in the next months.

Key Quotes

“While we have been long-term strategically bullish on the NOK, the tempo of last month’s appreciation has been surprising”.

“The move was not least triggered by a more hawkish NB than we and markets had pencilled in and the oil price rallying more than USD6/bl on speculations of an OPEC supply freeze. With the difficult details behind this OPEC supply cut yet to be worked out ahead of the official 30 November OPEC meeting, we still think achieving this objective will be easier said than done”.

“Given the vulnerable risk environment with political uncertainty, a Fed hike looming, a stronger USD, and US oil production adjusting, we could well see the oil price erase the latest gains, re-settling in the low-end of the USD46-52/bl range before yearend”

“Also given the latest developments in Norwegian data, speculative NOK positioning and NOK-seasonality we do see risks of a move higher and expect the cross to end the year higher than the current spot. For 2017 we still see a fundamental story supporting a lower EUR/NOK on growth, real rate differentials and a higher oil price”.

“We now forecast EUR/NOK at 9.10 in 1M (previously 9.30), 9.20 in 3M (9.30), 9.00 in 6M (9.10) and 8.80 in 12M (8.80)”.