EUR/USD took another hit after the Fed. As discussed above we expect the shift in language by Powell to favour a longer period of dollar dominance and keep the Atlantic Spread wide. All this reinforces our view that EUR/USD will keep sliding lower in the coming weeks, and we expect to see the 1.02-1.03 levels being tested. Elsewhere in Europe, we’ll see central bank announcements in Sweden and Norway this morning. We expect a 25bp cut by the Riksbank and a hold by Norges Bank, ING’s FX analyst Francesco Pesole notes.

EUR/NOK close to 11.80 is unwelcome by Norges Bank

“Forward-looking activity indicators are starting to paint a more optimistic picture in Sweden and inflation has come in hotter than expected of late. However, growth was soft in October. While the end of the easing cycle is in sight (we think rates will bottom at 2%), another cut today seems plausible given the Riksbank’s greater focus on growth and still dovish communication. Anyway, that is a consensus view and we don’t expect major deviations from 11.50 in EUR/SEK near term.”

“In neighbouring Norway, concerns about an excessively weak NOK have somewhat eased, but EUR/NOK close to 11.80 is still unwelcome by Norges Bank. A re-acceleration to 3.0% in core CPI in November should allow NB to keep supporting the currency via an unchanged policy rate for a bit longer.”

“We still think a cut can come in 1Q25, but that may start to be a closer and closer call. EUR/NOK continues to have good downside potential on fundamentals, but the patchy external environment ahead of Trump’s inauguration should keep NOK bulls satisfied with some stability at best.”