More recovery space – ING

Earlier this week, I pointed out how EUR/NOK was substantially expensive near the 12.0 mark and that the risks of a lower correction were very high. This correction has materialized and it is clear that the key driver for a recovery in the NOK at this stage is more favorable bets on the Fed, notes Francesco Pesole, FX strategist at ING.

A further EUR/NOK depreciation to 11.60-11.70

“At 11.85, EUR/NOK remains expensive, but we still need to highlight how the risks of speculative dynamics (favored by weaker NOK liquidity) will keep volatility on both sides quite high. We believe Norges Bank will remain focused on supporting the crown and refrain from sounding dovish at next week’s meeting.”

“Ultimately, this may favor further EUR/NOK depreciation to 11.60-11.70 and potentially even lower levels if the Fed cuts by 50bps.”