EUR/NOK Outlook:
The EUR/NOK is likely to decrease as the rate is currently below its 90-day average and near recent lows. The strength of the NOK, influenced by rising inflation and positive forecasts, is weighing on the euro's position.
Key drivers:
• Rate gap: The European Central Bank faces challenges with higher energy inflation and a weaker growth outlook, while Norges Bank's recent performance suggests a stronger NOK.
• Risk/commodities: Oil prices are at recent highs, which impacts the euro negatively, as higher energy costs strain the Eurozone's economy.
• One macro factor: Norway's inflation increase is leading to expectations that Norges Bank may hold interest rates steady.
Range:
The EUR/NOK is expected to drift lower within its recent 3-month range, testing potential new lows.
What could change it:
• Upside risk: A significant easing of geopolitical tensions in the Middle East could support the euro.
• Downside risk: Further increases in oil prices could exacerbate pressure on the euro, driving the rate lower.
