NOK should outperform EUR in the coming weeks and months on the back of growing policy divergence between the Norges Bank’s policy outlook and the ECB’s, which is reflected in an increasingly negative 2Y EUR-NOK rate spread. The divergence could intensify as both banks start to cautiously normalise their policies. Investors may continue to see NOK as a higher beta proxy for the EUR, as NOK tends to outperform when the EUR is supported. EUR/NOK could see 9.40 by the middle of the year. However, depending on incoming data, an undershoot cannot be excluded.
Credit to Credit Agricole Investment Bank