The Norwegian krone has seen support the past month on notably rising energy prices and is currently trading below 9.80. Analysts at Danske Bank expect EUR/NOK to move slightly higher towards 10.00 on rising global recession risks but emphasise that 2022 ultimately could prove the turning point for NOK.

A tug of war significantly widens outcome space

“In a tug of war between rising global recession risks and a substantial positive terms of trade shock to Norway the outcome space for EUR/NOK has widened substantially. Our models indicate that EUR/NOK is now overvalued and we cannot rule out a regime shift in terms of a yearlong NOK rally eventually starting in 2022.” 

“We think global recession risks will dominate in the coming months and we think spring risks are skewed to the topside – albeit uncertainty is high.”

“In light of the substantial rise in energy price, we lower our profile but have the same trajectory. We forecast EUR/NOK at 9.80 in 1M (from 10.10), 10.00 in 3M (from 10.30), 10.00 in 6M (10.40) and 10.00 in 12M (10.40).”