The Norwegian krone has proved the top performing major versus the USD and EUR over the last year. Key to the outperformance has been monetary tightening byt the Norges Bank, which is set to continue supporting NOK, economists at CIBC Capital Markets report.

Oil prices to reverse some of its gains in 2022

“We look for another 25bps tightening to come at the 16 December meeting, in line with the updated Monetary Policy Report.”

“While the macro rebound and uptick in the oil sector are seen to justify policy action, the obvious differential between the Norges Bank and most other major central banks is that the tightening cycle is framed by an inflation profile which is set to remain below target over the forecast horizon.”

“Our global base case has crude oil prices reversing some of its gains in 2022, which could have the central bank pushing back a bit on the degree of tightening ahead.” 

“Although we continue to expect NOK gains versus the EUR, they are set to be less aggressive in the next 12 months compared to the last.”