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

Analysts at UBS are forecasting a significant strengthening of the Norwegian krone (NOK) against the euro (EUR) through mid-2027, maintaining a bearish outlook on the EUR/NOK currency pair despite its recent losses.

Bearish Targets Set for EUR/NOK

UBS projects a steady decline in the EUR/NOK exchange rate, which signifies a stronger krone. The bank's report outlines a clear downward trajectory for the pair over the next year.

Key price targets from the forecast include:

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

Based on this outlook, UBS recommends that investors consider entering short positions on the currency pair at current levels or selling into any rallies.

Rationale and Market Context

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The forecast comes after the Norwegian krone retraced approximately half of its year-to-date gains versus the euro. UBS attributes this recent pullback to pressure from falling oil prices and heightened expectations for global interest rate hikes.

Despite the recent pressure, the bank believes a supportive external environment and an attractive carry—the return earned from holding a higher-yielding currency—will ultimately favor renewed krone strength. These factors underpin the bank's expectation for the currency to outperform the euro.

What This Means for Investors

The UBS projection suggests that the factors currently weighing on the krone, such as commodity price volatility, may be temporary. The bank's outlook implies that the fundamental case for a stronger NOK remains intact.

For foreign exchange traders, the forecast highlights a potential opportunity in the carry trade, where investors can potentially profit from the interest rate differential between the two currencies. However, the outlook is contingent on the materialization of a more favorable external backdrop, a key driver for commodity-linked currencies like the Norwegian krone.