NOK outlook stays constructive – Danske Bank

Thomas Rosenlund, Analyst at Danske Bank, sees the Norwegian Krone keeping its positive outlook intact in the next months.

Key Quotes

“Following the Norges Bank decision yesterday, which was a bit more dovish than our expectations, the EUR/NOK rose 6-7 figures, reflecting the slightly more dovish message than expected”.

“However, we do not see it as a game changer for the NOK outlook. External factors and stretched positioning have been the key headwinds for the NOK recently, while the domestics have improved. Indeed, accelerating growth with a narrowing output gap is the ideal cocktail for an undervalued currency such as the NOK”.

“As the global risk environment is more positive post-Fed, we expect the spike in EUR/NOK in yesterday’s session to be minor and probably short-lived when NOK rates have adjusted and FX markets’ focus returns to near-term reduced external headwinds. Hence, we still recommend gradually building up strategic NOK exposure on dips”.