The Norwegian Krone (NOK) experienced weakness in June, with the EUR/NOK exchange rate peaking near 11.35, according to Nordea’s Senior Macro and FX Strategist Sara Midtgaard [1]. However, the outlook has shifted, with expectations now for limited further upside in EUR/NOK and a potential move back towards 11.00 by the end of July [1]. This anticipated NOK strength is attributed to increased daily NOK purchases by Norges Bank, the possibility of higher Brent crude prices, and a likely policy rate hike in August [1].
Midtgaard notes that the market currently assigns only around a 60% probability to another rate hike by Norges Bank, but Nordea expects the central bank to proceed with an increase in August [1]. She highlights that stronger-than-expected US economic data and weaker global equity markets are key risks that could challenge this view in the near term [1].
Overall, the balance of risks has shifted in favor of a stronger NOK during July, with the potential for EUR/NOK to fall back towards the 11.00 level if supportive conditions persist [1].
CONCLUSION
The Norwegian Krone is expected to regain strength against the Euro, supported by Norges Bank's actions and potential oil price increases. While risks remain from US data and global equities, the outlook for NOK has improved, with a move towards 11.00 in EUR/NOK anticipated by the end of July.