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End of rosy skies for the NOK? – Rabobank

FXStreet (Edinburgh) - In the view of Senior Currency Strategist at Rabobank Jane Foley, the Norwegian krone would face headwinds in the next periods, challenging its upbeat prospects.

Key Quotes

“In May, the government announced an increase in the amount of spending that would be financed by the petroleum wealth fund. Although at 2.8% of the total fund, this was below the accepted 4% cap, at NOK140.9 bln, total spending drawn from the fund was as a record 5.8% of GDP”.

“The healthy budget position of the government will help support the economy going forward”.

“Nevertheless the improved outlook of the Norges Bank in its September 18 policy meeting was a surprise to many commentators”.

“In September, the Norges Bank dropped a reference to rate cut potential which was present in its previous statement in June. It also signalled that the first rate hike of the cycle could be seen in early 2016”.

“We see risk that the Norges bank’s more upbeat tone could be challenged by the slowdown in oil investment and by weak growth in the Eurozone”.

“Soft oil and potentially food prices (in the wake of Russian bans on EU food imports) may also enhance disinflationary pressures. August CPI dropped by -0.3% m/m”.

“While we have lowered our EUR/NOK forecasts in the wake of yesterday’s news, but we expect an uptrend in EUR/NOK to re-emerge. Our 3 mth EUR/NOK forecast stands at 8.15”.

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