EUR/NOK likely to fall towards 9.45 in December 2017, to fall further towards 8.75 in 2018 – Lloyds Bank

In spite of the solid oil prices, which have historically underpinned the Norwegian krona, the EUR/NOK pair has risen towards the upper end of its medium-term range, noted Lloyds Bank. Acceleration in inflation in September to 1.6 percent was rapidly reversed in October to 1.2 percent. This keeps the general trend in inflation, from last summer’s peak at 4.4 percent, downward.

During its October policy meeting, the Norges Bank kept interest rates on hold, with inflation expected to stay below 2.5 percent in the years ahead. Deputy Governor Nicolaisen, in recent comments implied policymakers would be patient with regard to inflation, as it should eventually rise back to target. Increased household debt continues to be an issue and, as such the governor expects only a gradual rise in interest rates ahead.

“We therefore see EUR/NOK falling towards 9.45 in December 2017, before declining further in 2018 back towards 8.75”, added Lloyds Bank.

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