Nordea Look Expect Contained Movement In H124, Before Appreciation Later In The Year

When it comes to NOK swings Nordea believe that “NOK sales will move into the background, but interest rates will remain important for the NOK.”

• “A further decline in inflation abroad will pave the way for rate cuts in both the U.S. and in Europe.”
• “In that regard, tonight’s Fed meeting will be key for markets and the NOK in the weeks to come.”
• “The Fed is unlikely to rock the boat and at least two inflation prints will come before their March meeting, when new forecasts will be presented.”
• “If the upcoming inflation data disappoints, the Fed would be forced to wait until the summer to cut, leading to a somewhat weaker NOK than we have today.”
• “Also keep in mind that Norges Bank is highly unlikely to start cutting rates before the Fed and ECB.”
• “With small shifts in interest rates toward the summer, we see EUR/NOK rangebound in the NOK11.20-11.50 area. When rates abroad are lowered during the second half of 2024, we see NOK faring better and expect EUR/NOK to reach NOK11.00 by the end of 2024.”
• “We still believe the biggest risk to NOK is inflation abroad surging again. This could delay the expected rate cuts elsewhere. Near term, heightened geopolitical tensions, not least in the Middle East, are a major risk factor.”