EUR/NOK: Choppy krone ahead even if oil prices remain high – Nordea

The Norwegian krone has strengthened somewhat again, in tandem with improved market sentiment. In the opinion of economists at Nordea, markets will likely be choppy ahead, bad news for the NOK even if oil prices remain high.

Norges Bank reducing NOK selling should help on the margin

“Central banks, with the Fed in the lead, must continue to remove the loose monetary policy due to persistently high inflation. Hence, the turbulence in stock markets will likely remain until central banks bring inflation under control and rates peak. For the NOK, this means that there will be choppy ahead, even if oil prices remain high.”

“If risk sentiment remains good and oil prices high, we could see EUR/NOK at 9.75 again. But that’s a big if. From a technical perspective, a solid support level should be around 10.00, the 200-day moving average.”

“Norges Bank just announced that they intend to sell NOK1.5 bn in June on behalf of the government, down from NOK2 bn in May and April. Tthis points towards a marginally stronger NOK ahead since the combined NOK flows from Norges Bank and oil companies will turn positive again ahead.”