Norges Bank rate cut still on the cards – Danske Bank

By FXStreet FXStreet (Edinburgh) – Analyst at Danske Bank Kristoffer Lomholt argued that a rate cut by the Norges Bank at this month’s meeting remains a chance.

Key Quotes

“While the NOK is significantly weaker than what Norges Bank projected at the latest monetary policy report from June, the weakness has primarily been driven by a lower oil price and a rise in the NOK liquidity risk premium”.

“Indeed, looking at the oil price in NOK, the recent drop has been very significant, marking a new record low at the end of August”.

“In our view this significantly increases the probability of another Norges Bank insurance cut as was done in December 2014 when Governor Olsen’s cut was a preemptive move against the increase in the tail risk of the Norwegian economy collapsing”.

“Currently it is our belief that only a very strong Regional Network Survey on Friday can hinder a rate cut and a dovish tone at the September meeting”.

“Most indicators do not suggest that this will be the case and we consequently expect relative rates to be a positive for the cross in the short to medium term”.

“We target EUR/NOK at 9.40 in 1M and 9.50 in 3M”.
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Source:: FX Street