EUR/NOK to ease towards 8.50 by the end of the year – Lloyds Bank

In view of the analysts at Lloyds Bank, from a longer-term perspective, we believe the krone remains fundamentally undervalued and look for EUR/NOK to ease towards 8.50 by the end of the year.

Key Quotes

“Since hitting an 18-month high against the euro in mid-February, the Norwegian krone has weakened over the past month, pushing EUR/NOK back above 9.0. The move has occurred against a softer oil price backdrop and a shift lower in interest rate expectations.”

“For the former, front-month Brent crude has dropped from around $57/bbl to around $52 bbl as the impact of US shale output has weighed on the price outlook. Near term, the prospect of some stabilisation in the oil price and a continued improvement in the broader risk environment should offer some support to the krone. Over the coming quarters a recovery in investment should lead to faster GDP growth and a fading in expectations of a loosening in monetary policy.”