EUR/NOK Outlook:
Likely to decrease, as EUR is trading below its recent average and near recent lows with pressure from current economic factors.
Key drivers:
• Rate gap: The European Central Bank has held interest rates steady despite falling inflation, while Norges Bank is expected to cut rates cautiously, potentially widening the gap.
• Risk/commodities: Oil prices are at recent highs, which generally bolster the NOK due to Norway’s reliance on energy exports, adding further pressure on the weaker EUR.
• Macro factor: Eurozone inflation has dropped below the ECB's target, raising concerns about future economic performance and interest rate cuts.
Range:
The EUR/NOK is likely to drift lower within its recent range, with a risk of testing the lower levels.
What could change it:
• Upside risk: A resolution to the Russia-Ukraine conflict could restore confidence in the euro.
• Downside risk: Continued volatility in oil prices could weaken the NOK further, putting additional pressure on the EUR.
