NOK Bull Makes Its Case
Norway’s largest financial services group, Den Norske Bank (DNB) feels the Norwegian krone is finding a firmer footing versus the euro (EURNOK) and envisages it rising against the single currency in the coming months. Traders will have their own opinions but for DNB’s part it sees the EURNOK at 9.20 in three months time and down at 8.80 in a year. But perhaps what’s more interesting is why the Norwegian bank expects the NOK to outperform against the euro. DNB thinks Norway’s, albeit admittedly slow, economic recovery will continue, that inflation in Norway will pick up over the next six months and that any moves toward tighter monetary policy in the euro zone and Sweden will be mirrored in Norway.
Cautiously bullish on the oil price, DNB thinks that too will support the NOK. Additionally DNB feels that “massive shifts in positioning have left speculative accounts neutral” while it thinks that “commercial NOK demand [will] pick up as old hedges roll off.” That last comment is arguably telling given DNB’s niche position in the Norwegian market. Of course there are risks to DNB’s scenario, which the bank does point out. Market momentum for a stronger euro could be maintained or the oil price may not play ball. At the very least traders may find DNB’s outlined scenario interesting.
Written by Neal Kimberley, External Currency Analyst.