EUR/NOK likely to trade around 9.30 by end-2018 – Lloyds bank
Source: FxWire Pro - Commentary / 26 Feb 2018 09:40:31 Eastern Standard Time
The Norwegian krone has bolstered through January, trading close to 9.50 against the euro after having traded close to 10.00 in mid-December, which was its weakest level since December 2008, noted Lloyds Bank in a research report.
But a series of weak domestic data releases, along with the decline in Brent Crude prices, have seen this trend reverse abruptly. The main concerns from an economic perspective reside in subdued inflation and economic growth figures.
In January, core inflation fell 0.8 percent sequentially, while GDP shrank 0.3 percent in the fourth quarter. This downbeat data come at a time when the Norges bank has just shifted to a more ‘hawkish’ stance, with Governor Olsen recently hinted that a rate hike might occur by the end of 2018. Despite this, some indicators still provide reasons to be positive.
PMI surveys are in expansionary territory and the jobless rate at 2.6 percent is close to its cyclical lows. Moreover, some ‘fair value’ estimates imply that the krone is fundamentally undervalued.
“As such, we are bullish on the krone over our forecast horizon, and expect EUR/NOK to decline to 9.30 by end-2018”, added Lloyds Bank.
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