EUR/NOK now points to some rangebound – Danske Bank

The Norwegian Krone is expected to remain sidelined for the time being, noted Allan von Mehren, Chief Analyst at Danske Bank.

Key Quotes

“EUR/NOK is trading a little lower following yesterday’s Norges Bank meeting suggesting some had feared a more dovish twist to the statement. However, in our view the announcement is in no way a NOK buy signal. Since we took profit on our short EUR/NOK (16 March) and long NOK/SEK (16 April) positions we have been sidelined in NOK”.

“Our fundamental predisposition is to re-enter a long NOK position. However, in the near-term we see the balance of risk skewed towards a slightly weaker trade weighted NOK as we pencil in a range trading EUR/NOK, USD/NOK moving higher and as NOK/SEK could well erase recent gains as the SEK technically seems oversold”.

“Positioning is becoming less of a headwind for the NOK but in the current global cyclical environment, the potential of a stronger USD weighing on oil prices and the outlook of lower near-term Nibor fixings we do not like the balance of risk”.

“Also given that markets already price in a high probability of a September hike, we would want to prefer a clearer signal that the latest string of disappointing domestic data releases are but temporary before re-buying NOK”.