Norges Bank’s guidance signals another rate cut

Norwegian Krone continues to trade poorly, driven by prices of crude, with EUR/NOK reaching the year's high crossing 9.50 in early December and NOK/SEK falling to 23 year low.

Significant easing of monetary policy through the exchange rate was probably the primary reason for Norges bank to leave rates unchanged in its latest meeting, in spite of further 15% decline in crude prices since last meeting.

"Going forward, Norges Bank's guidance is signalling another rate cut, and with rates still 0.75% above the zero bound, it clearly has more scope to deliver than other central banks in Europe", says RBC Capital Markets in a research note. 

Norway's domestic data are certainly not impediment, with the onshore GDP barely positive in second and third quarters, and high inflation at 3.1% because of import prices. There are upside risks for EUR/NOK in near term, until confidence is seen that crude prices formed a base

While this risk remains and until we are confident crude prices have formed a base, we continue to see the risks to the upside for EUR/NOK.