Francesco Pesole at ING highlights that the Norwegian Krone (NOK) faces some downside risks following the Norges Bank meeting, primarily due to benign CPI-ATE inflation prints of 2.7% in both June and July, which could prompt a slightly less hawkish tone from policymakers [1]. Despite these risks, ING expects Norges Bank to keep rates steady at 4.25% today, aligning with market expectations, and anticipates another rate hike later this year, though the likelihood of multiple hikes has diminished [1].
Markets are currently pricing in 27 basis points of tightening by year-end, which is broadly consistent with ING's base case scenario [1]. However, ING has become less convinced about the prospect of more than one additional rate hike, reflecting the impact of recent inflation data and the central bank's communication [1].
Despite limited upside for front-end NOK rates, ING maintains a bullish stance on the Norwegian Krone, citing strong fundamentals and an attractive carry. The firm sets a year-end target of 10.75 for EUR/NOK, indicating confidence in NOK's performance against the euro regardless of further rate hikes [1].
No specific market reactions or analyst opinions beyond ING's outlook are discussed in the article [1].
CONCLUSION
ING remains bullish on the Norwegian Krone, projecting a 10.75 EUR/NOK target by year-end despite dovish risks from Norges Bank's meeting and subdued inflation prints. The outlook is supported by strong fundamentals and attractive carry, even as the likelihood of multiple rate hikes has decreased. Market impact is expected to be medium, with sentiment leaning positive for NOK.