EUR/NOK has overall traded quite volatile the past month and is currently trading below the 10.10 level. Analysts at Danske Bank continue to expect the pair to move higher going into 2022 on the back of a shift in the global investment environment, tighter global liquidity conditions, less fiscal NOK buying and shakier risk appetite leaving NOK vulnerable to negative news.
Topside favoured given the external environment
“We still think the balance of risk favours the topside in EUR/NOK. We face a record tightening of global liquidity and monetary conditions in order to fight inflation at a time where the global economy was already slowing. In such an environment, NOK rarely does well and short-term this is only worsened by geopolitical risks. Also, NB is likely to turn a considerable net krone seller of NOK500-800M later in the year.”
“We forecast EUR/NOK at 10.20 in 1M (from 9.90), 10.30 in 3M (from 10.20), 10.40 in 6M (unchanged) and 10.40 in 12M (unchanged).”