EUR/NOK likely to decline towards 8.90 by end-2017, says Lloyds Bank

In late June, the Norwegian krone has strengthened, briefly rising above 9.60 against the euro, after trading to a multi-year low around 8.80 in mid-February. The move occurred as oil prices weakened and inflation subdued. Brent crude dropped below USD 45 per barrel and domestic consumer price inflation dropped to 1.9 percent in June.

Combined, these resulted in a paring back in interest rate expectations. Yet, there is a bullish likelihood for krone, noted Lloyds Bank in a research report. In the near term, the possibility of a consolidation in the oil price and a comparatively stable risk environment should be supportive. Furthermore, domestic PMIs are in expansionary territory and the jobless rate continues to be at 2.6 percent.

During its latest meeting, the Norges Bank kept its policy rates on hold. But it indicated that the risks to rates are “balanced”, leading to waning expectations of looser monetary policy.

“We view the krone as undervalued and look for EUR/NOK to decline towards 8.90 by the end of the year”, added Lloyds Bank.

FxWirePro launches Absolute Return Managed Program. For more details, visit http://www.fxwirepro.com/invest