EUR/NOK expected to remain in a consolidative mode – Danske Bank

Valtteri Ahti, Chief Strategist at Danske Bank, believes the Norwegian Krone remains poised to extend the consolidation between 9.47 and 9.75 in the near term.

Key Quotes

“In terms of the NOK, rising speculations of a re-imposition of Iran sanctions on 12 May have driven oil spot prices higher. Indeed, it makes sense that a higher oil price should support the NOK via an improved Norwegian terms of trade. However, we emphasise that this type of geopolitical rise in the front end of the oil curve has historically had less of an impact on the NOK than when the whole oil curve is driven by global demand shocks”.

“That said, the combination of higher oil prices and a weak NOK supports the case for a Norges Bank September rate hike. We stick to our view that EUR/NOK is a near-term 9.47-9.75 range play even if the risk/probability of a low-end break has risen”.