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Norwegian Krone Poised to Strengthen Against Euro, UBS Forecasts
UBS maintains a bearish outlook on the EUR/NOK currency pair, forecasting the Norwegian krone will strengthen against the euro over the next year despite a recent pullback in its performance, according to a note from the bank.
The Forecast
Analysts at UBS project a steady decline in the EUR/NOK exchange rate, which indicates a strengthening krone. The bank recommends that investors enter short positions on the pair at current levels or sell into any rallies.
UBS provided the following price targets:
- 10.80 by September
- 10.70 by December
- 10.60 by March 2027
- 10.50 by June 2027
Rationale for Krone Strength
AdUBS attributes its forecast to a combination of factors expected to favor the Norwegian currency. The bank anticipates a supportive external environment will renew the krone's upward momentum.
Additionally, analysts noted the currency's already attractive carry, a strategy where investors profit from the interest rate differential between two currencies. This suggests Norway's relatively higher interest rates make holding the krone appealing.
Market Context
This bullish forecast comes after the Norwegian krone recently retraced approximately half of its year-to-date gains against the euro. According to UBS, this weakness was driven by two main headwinds: falling oil prices and heightened expectations for global interest rate hikes.
Despite these recent pressures, the bank believes the underlying conditions are in place for the Norwegian krone to resume its outperformance against the common European currency.