A modest EUR/NOK slow down expected in Q4

In Norway, the recent decline in oil prices, weaker-than-expected domestic data, and a modest uptick in unemployment has increased market speculation about additional rate cuts by the Norges Bank. Still for no further easing is expected, particularly given the recent NOK depreciation and increased financial stability considerations. 

"However, the risks are skewed toward an additional rate cut in the remainder of 2015, particularly if the oil outlook deteriorates further, against the oil expectations. On the inflation front, a slower pace is expected in the increase of underlying price pressures (0.0% m/m, 2.6% y/y), attributing last month's upside surprise to residual pass-through from a weaker exchange rate", says Barclays. 

Although inflation will be important in the coming week, the medium-term inflation expectations remain firmly anchored, implying that the Norges' policy debate still involves contemplating downside risks to growth from lower oil prices against increased financial stability considerations, likely exacerbated by additional rate cuts. 

"The EUR/NOK is close to its highs but expect only a modest reversal in Q4 from current levels", added Barclays.