EUR/NOK likely to trend downwards in medium to long term

The Norwegian krone is expected to be on weaker levels against the US dollar and the euro in short term. This is because of the fact that the central bank considers the exchange rate as part of monetary policy and that the oil price is expected to drop again after a stronger period at the beginning of 2016, said Commerzbank in a research report. During its April meeting, the Norges Bank mentioned that the outlook continues to be the same since March. This indicates that the central bank might further ease policy later in 2016.

The NOK is expected to rebound moderately against the euro by the end of 2016, added Commerzbank. During that point, the Norwegian central bank will be at the end of its rate cutting cycle, whereas the European Central Bank will continue with its expansionary policy. Under the likelihood of EUR strengthening, the Norges Bank is thus expected to undertake additional measures by the end of 2016.

“We expect EUR-NOK to trend downwards in the medium to long term future”, noted Commerzbank.

Meanwhile, the normalization of the US monetary policy dominates the USD/NOK pair. Hence the currency pair is likely to appreciate somewhat in the months to come, added Commerzbank.