EUR/NOK seen higher near-term – Danske Bank

Chief Analyst at Danske Bank Christin Tuxen believes the cross could grind lower in the short term.

Key Quotes

“Two factors have primarily driven EUR/NOK lower in the first two sessions of this week: i) EUR-weakness post the German election, and not least ii) oil price moving higher”.

“With the latter, it is worth noting that backwardation in the crude oil forward market has widened back to 2014 levels, suggesting that the current high spot level is temporary. Either current support is due to temporary factors, e.g. concerns about Iranian nuclear deal or it will lead to higher output from US shale producers that will force prices back into the middle of the USD50-60/bbl range over a 1-2Y horizon”.

“As we know the NOK is driven primarily by the front end of the oil curve, it supports our short-term view of EUR/NOK upside risk given the spot move to the low end of the 9.25-9.40 range”.