EUR/NOK: Norges Bank's hawkishness to drive the pair towards 9.40/30 – ING

Norway’s central bank has hiked rates for the third time, taking the deposit rate up to 0.75%. But the bigger news is that Norges Bank has considerably upgraded the number of rate hikes it expects to implement by the end of 2023. Economists at ING think that the hawkish projections by Norges Bank all but reinforce the rate outlook for the krone.

EUR/NOK to trade below 9.50

“The 25bp hike and pledge to hike again in June was accompanied by a sizeable hawkish revision in rate projections, with a terminal rate now seen at 2.5% in 2023. The positive terms of trade shock along with rising domestic inflation leave little doubt that NB will follow through on its upgraded rate path.”

“NB’s hawkishness – paired with instability in the Russia-Ukraine situation which could continue to push energy prices higher – points to more EUR/NOK weakness in the coming weeks.

“We expect a decisive break below 9.50 very soon, with room for a move to the 9.30-9.40 region.”