NOK stays wary of CPI and Norges Bank – Danske Bank

In view of Senior Analyst at Danske Bank Mikael Milhoj, the Norwegian Krone should stay under pressure in light of the upcoming inflation figures for the month of April (Wednesday).

Key Quotes

“EUR/DKK spiked yesterday and we look for the cross spot to stay close to 7.4400 on 12M on strong DKK fundamentals not fully mitigated by the spread between DK and eurozone policy rates. The next important events for DKK will be the June ECB policy meeting, German elections and the tightening of LCR requirements in Q4”.

“Apart from DKK, EUR/Scandie saw a very muted reaction to the election of Macron. The big release this week in Norway is the April inflation print due tomorrow and given Norges Bank’s significant focus on financial stability, the weaker NOK should be most welcomed by Norges Bank as it reduces the downside risks to inflation”.

“Imported inflation has been the key driver for the core measure over the last year - explaining roughly 2/3 of variability – meaning the latest NOK depreciation will buy Norges Bank more time. Our call is that the April print will still fall short of Norges Bank’s expectations but the last year has shown how big NOK moves – in either direction – have resulted in surprises”.