The EUR/NOK pair will remain at around 9.40 as long as the oil price continues to be stable, noted Commerzbank in a research report. As additional reduction of the interest rate is still a possibility by the Norges Bank, the Norwegian krone is not expected to appreciate for some time.
The likelihood of a rate cut has bolstered after the Brexit vote by the UK while the IMF also cautioned that the UK's leaving of EU might adversely affect Norway’s exports.
“However, we see moderate upside potential for the krone against the euro towards year-end,” added Commerzbank.
At that point, the Norges Banks might put an end to its rate-cut cycle. Meanwhile, the European Central Bank is expected to remain expansionary for a long time, according to Commerzbank.
Hence, the EUR/NOK is likely to move downwards in the medium-term to long-term. However, the USD/NOK pair is dominated by the US monetary policy’s normalization. Hence, the currency pair is likely to move higher a bit in the months ahead, stated Commerzbank.
