NOK faces downside pressure ahead in the year – Danske Bank

By FXStreet FXStreet (Edinburgh) – Chief Analyst at Danske Bank Allan von Mehren has assessed the prospects for the Norwegian krone for the coming months.

Key Quotes

“The bounce in the oil price together with higher NOK-rates have returned the NOK to Norges Bank‘s (NB) projection from December and consequently the currency is no longer an argument for a higher rate path”.

“Global rates have fallen significantly since the NB December meeting and despite the latest rebound in the oil price, it remains significantly below NB’s projections”.

“The latter increases the tail risk of the Norwegian economy falling over and thereby the need for lower NOK rates”.

“Ample supply and global growth worries will in our view limit the short-term upside potential in oil and with little indications of the Norwegian business cycle turning, the risk of a March cut has in our view risen significantly in 2016”.

“In December NB hinted at a forecast-conditioned 40-60% probability of a cut at the meeting in March; markets price roughly a 30% probability. In sum, we think risks to EUR/NOK for the coming month are skewed to the upside and we forecast the cross at 9.60 in 1M”.
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Source:: FX Street