EUR/NOK: Norges Bank bolsters NOK
EUR/NOK: Norges Bank Strengthens NOK, Outlook Points to Decline
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Norges Bank has recently taken its currency support up a few notches: along with signalling two more 25bp hikes to peak, daily FX purchases were trimmed more aggressively in July, from NOK 1.3bn to 1.0bn.
Stickier-than-expected core inflation in Norway, an ultra-tight jobs market and decent growth are all endorsing the recent hawkish escalation by Norges Bank. NB will be satisfied with NOK’s recent good performance, but the currency remains around 7% weaker than its 5-year trade-weighted average.
This quarter can still see risk-off-related upside corrections in EUR/NOK, but we now feel more comfortable about our call for a decline below 11.00 in the pair before year-end.