The stabilization and recovery in the crude oil market has had a direct and meaningful impact on the NOK, reflected by a 6% appreciation in the trade weighted index over the past month.
However, analysts believe this rally in crude oil should be short lived, coming back under pressure in Q2 before a broader and stronger recovery in H2.
Having revised their growth and inflation outlooks lower, based on a crude oil forecast of $64bbl by the end of the year.
The market is currently fully pricing in a 25bps cut by September. So the combination of this and the expectation for crude oil prices to come back under pressure in the short-term leaves EUR/NOK to trade back to 8.70 and USD/NOK to 8.29 by mid-year, says Lloyds Bank.
