Earlier this week, our expert analysis highlighted the overvaluation of EUR/NOK nearing the 12.0 mark, indicating a high likelihood of a correction in the near future. This anticipated correction has now occurred, with the key factor for a NOK recovery being attributed to increasingly dovish bets on the Fed, as acknowledged by ING’s FX strategist Francesco Pesole.
Anticipated Depreciation Range for EUR/NOK
Despite the current rate of 11.85, it is important to note that EUR/NOK still remains relatively expensive. The presence of speculative dynamics, fueled by limited NOK liquidity, is expected to sustain heightened volatility on both ends. Our analysis suggests that the Norges Bank will continue to prioritize the strengthening of the krone, potentially refraining from adopting a dovish stance at the upcoming meeting.
As a result, we foresee a potential further depreciation of EUR/NOK to the range of 11.60-11.70, with the possibility of even lower levels in the event of a significant 50bp cut by the Fed.
Analysis and Implications
For individuals involved in financial markets or currency trading, the expected depreciation of EUR/NOK presents both risks and opportunities. As the market dynamics continue to evolve, it is crucial to stay informed and adapt investment strategies accordingly. By monitoring key factors such as central bank policies and global economic trends, investors can position themselves to capitalize on potential market movements and safeguard their financial interests.