EUR/NOK to fall in medium-term

Norges Bank surprised markets significantly by not cutting rates today. Norges Bank did lower the rate path indicating a single rate cut (in June). 

Markets are pricing in two full 25bp rate cuts: one in June 2015 and another in December 2015. 

Danske Bank notes.....

• We expect a long-run re-pricing of Norges Bank to play out. 
  
  
• We expect a single 25bp rate cut in June but that NB will leave rates unchanged thereafter. 
  
  
• In the short-term we expect the downside risk to the oil price to limit the upside potential in the NOK. 
  
  
• Our fundamental bullish view of the NOK, however, is unchanged. 
  
  
• We lower our 1M target to 8.65 (previously 8.75) but maintain our 3M, 6M and 12M forecasts of 8.50, 8.25 and 8.15, respectively.