EUR/NOK unlikely to exceed 9.57-9.60 for now, should slowly trend back towards 9.50: Commerzbank

The EUR/NOK currency pair is not expected to exceed the 9.57-9.60 range for now and should slowly trend back towards 9.50, according to the latest research report from Commerzbank.

Weaker CPI data alone does not mean that Norges Bank will stop its rate cycle. In September the central bank had started the normalisation process and had hiked its key rate.

However, now the October inflation data disappointed, mainly core inflation at only 1.6 percent y/y. At 3.1 percent overall inflation remains well above the inflation target of 2 percent; it means the inflation trend has turned, but certainly not in a worrying manner.

Weaker-than-expected data does not mean the end of the young cycle. In particular as Norges Bank has always stressed that it will be cautious anyway and is not planning the next rate hike until Q1 2019.

Moreover the economy is humming, in particular the mainland economy outside the oil and gas sector. Inflation data would have to disappoint over 2-3 months for Norges Bank to reconsider its whole approach.