It will take more time before higher rates work through the economy. Therefore, risk-sensitive currencies such as the Norwegian krone and the Swedish krona are set to remain under pressure.

Better outlook for the NOK than the SEK longer out

“Risk-sensitive currencies like the NOK and SEK will continue to feel the pressure of higher global rates, falling equity markets, and a gloomy global economic outlook. We do not see this changing in the short-term.”

“Over time, when central banks reach peak rates, risk sentiment could improve as markets focus on potential rate cuts that could be in the cards in a year or two. Improved risk sentiment and a retraction of the US dollar dominance should be good news for both the NOK and the SEK.”

“Our view of relatively high energy prices and rising petroleum investments in Norway over the coming years imply a better outlook for the NOK than the SEK longer out.”