FXStreet (Edinburgh) – Kristoffer Lomholt, Analyst at Danske Bank, reviews the prospects for the pair in the upcoming periods.
Key Quotes
“EUR/NOK edged sharply higher yesterday in a move driven by several factors: 1)weak NOK manufacturing PMI confirmed that the rebound in April was driven by the usual Easter effect, 2) credit growth to households dropped, giving some relief to Norges Bank (previously this has been an important factor for Governor Olsen), 3) rate spreads narrowed and 4) EUR/NOK breached several important technical barriers (e.g. trend, DMA, range boundaries)”.
“This significant move leaves the question of where EUR/NOK is heading next. Our shortterm regression models suggest that the upside potential from here is limited with a model fair value estimate of 8.68. In the short term the next big event will be the Norges Bank Regional Survey on Friday. The release will most likely indicate slower growth ahead in line with Norges Bank’s expectations, which should confirm our call for a 25bp cut on 18 June”.
“Due to the missing OIS market in Norway and the widening in the 3M NIBO policy rate spread it is impossible to exactly estimate how much easing markets currently price in. Estimating the spread, however, suggests that a 25bp June cut is now almost fully priced, also leaving less upside potential in EUR/NOK from a relative rate perspective”.
(Market News Provided by FXstreet)