Nordea: More Pain For NOK Ahead

Nordea note that “Norges Bank will reduce their NOK sales to NOK1300mn/day in June. Some market participants could be disappointed by the elevated NOK sales still due ahead.”

• “Some (foreign) pundits have called for a complete stop to NOK sales from Norges Bank, but that is unlikely to happen because it could lead to tightening structural liquidity in the Norwegian money market and related higher NIBOR premia.”
• “We believe the NOK roller coaster ride will continue during the summer and see EUR/NOK trading around NOK12.30 during the summer. Higher moves cannot be excluded.”
• “In the short-term, there are multiple factors pointing to more pain for NOK (global inflation dynamics, U.S. liquidity/money supply, disappointing Chinese economic data & a reduction in liquidity around the Norwegian holiday season) and it is hard to see factors that are NOK supportive.”
• “We believe that NOK will be less weak towards year-end. One reason is that gas prices are likely to rise during the winter, implying higher NOK purchases from oil companies.”