UBS Forecasts Norwegian Krone to Strengthen Against Euro Through Mid-2027

UBS strategists are maintaining a bearish forecast for the EUR/NOK currency pair, anticipating the Norwegian krone will strengthen against the euro through the middle of 2027. The bank's outlook comes despite a recent pullback that has erased approximately half of the krone's year-to-date gains versus the single currency.

The Forecast in Detail

According to a note from the bank, the recent weakness in the krone is attributed to falling oil prices and heightened expectations for global interest rate hikes. Despite these headwinds, UBS projects a steady appreciation for the Norwegian currency over the coming year.

The bank's specific targets for the EUR/NOK exchange rate are:

• 10.80 by September
• 10.70 by December
• 10.60 by March 2027
• 10.50 by June 2027

Rationale and Market Context

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UBS bases its forecast on the expectation of a supportive external environment that should favor renewed strength in the krone. Analysts at the bank also pointed to the currency's already attractive carry as a key factor that will drive its outperformance against the euro.

For investors, carry trades involve borrowing in a currency with a lower interest rate and investing in a currency with a higher rate, profiting from the differential. The bank's view suggests that even with recent volatility, the underlying fundamentals support a stronger krone.

Implications for Currency Strategy

Reflecting its conviction in the forecast, UBS recommended that clients consider entering short positions on the EUR/NOK pair at current levels. This strategy would profit if the euro weakens against the krone as predicted.

Alternatively, the bank suggested selling the upside, a strategy that would capitalize on any rallies in the pair being short-lived. The overall message from UBS is that the Norwegian krone is poised to resume its upward trend against the euro.