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18 Mar 2015
EUR/NOK points downwards longer term – Danske Bank
FXStreet (Edinburgh) - Analysts at the Nordic Danske Bank expect the cross to inch higher in the near term, although in the longer horizon the NOK might drag the cross lower.
Key Quotes
“We expect Norges Bank (NB) to deliver a 25bp rate cut on Thursday”.
“NB is set to keep the easing bias by presenting a new rate path with a 50% implied probability of another rate cut before June. However, we do not expect Norges Bank to cut rates further post March”.
“The primary risk to our projection is that of NB leaving the rate unchanged. First, NB could put less emphasis on the Regional survey and more on other key figures. For instance, the import-weighted NOK is roughly 3.5% weaker than assumed in the December report. This will partly counteract the downward adjustment of the interest rate path, and also reduce the possibility of a rate cut”.
“Second, the increasing pressure in the housing market in the aftermath of the December cut could keep NB on hold until the recession is confirmed”.
“We expect EUR/NOK to bounce around the NB meeting before a trend lower in the cross constitutes. Leverage funds should look to sell EUR/NOK post the NB meeting. Corporates should hedge NOK income via option structures that maintain a profit potential”.
Key Quotes
“We expect Norges Bank (NB) to deliver a 25bp rate cut on Thursday”.
“NB is set to keep the easing bias by presenting a new rate path with a 50% implied probability of another rate cut before June. However, we do not expect Norges Bank to cut rates further post March”.
“The primary risk to our projection is that of NB leaving the rate unchanged. First, NB could put less emphasis on the Regional survey and more on other key figures. For instance, the import-weighted NOK is roughly 3.5% weaker than assumed in the December report. This will partly counteract the downward adjustment of the interest rate path, and also reduce the possibility of a rate cut”.
“Second, the increasing pressure in the housing market in the aftermath of the December cut could keep NB on hold until the recession is confirmed”.
“We expect EUR/NOK to bounce around the NB meeting before a trend lower in the cross constitutes. Leverage funds should look to sell EUR/NOK post the NB meeting. Corporates should hedge NOK income via option structures that maintain a profit potential”.