The Norwegian krone has continued to gain gradually against the euro in the last month with the help of ongoing rebound in the oil prices. Moreover, Norway’s economic data have also been quite positive, indicating certain stability in the country’s activity and lowering the possibility of further near-term reductions in the deposit rate.
But investment intentions in the country have declined sharply, while, the Norwegian economic growth is expected to be sluggish for a longer period of time. The Norwegian central bank has kept its dovish stance, while Governor Olsen has implied that the rates might be further lowered in 2016.
Even if oil prices are expected to rise further, slowdown in the pace in further gains and weak investment in the oil sector would urge the central bank to further ease policy in order to underpin economic activity, said Lloyds Bank in a research report. However, the Norwegian krone is already over priced and is likely to further appreciate against the euro in 2016.
“We forecast EUR/NOK ending 2016 around 9.0”, added Lloyds Bank.
