With the combination of rising global recession risks and elevated commodity prices the outcome space for the Norwegian krone remains very wide as opposing forces are at play. Strategists at Danske Bank expect EUR/NOK to move higher in the near-term on rising global recession risks but forecast a secular weakening trend amid the outlook for elevated inflation and commodity prices in the years ahead.

EUR/NOK is in a secular weakening trend

“We think EUR/NOK is in a secular weakening trend amid the outlook for elevated inflation and commodity prices in the years ahead. Also, relative unit labour costs is no longer the NOK-headwind it used to be. Meanwhile, near-term we still think risks are skewed to the topside amid rising global recession risks as central banks rapidly tighten policy at a time of supply shocks (COVID-19, war in Ukraine).”

“While NOK is likely to be better protected against weaker global growth than in the 2010s we still think NOK will suffer in our base case.” 

“We forecast EUR/NOK at 9.50 in 1M (from 9.90), 9.80 in 3M (from 10.00), and 10.00 in 6M (10.00) and 9.80 in 12M (10.00).”