UBS Projects Norwegian Krone Gains Against Euro Through Mid-2027

UBS analysts project the Norwegian krone will strengthen against the euro over the next year, maintaining a bearish outlook on the EUR/NOK currency pair despite the krone's recent pullback. The bank recommends traders establish short positions at current levels, anticipating a downward trend for the pair.

Forecast Details

In a note to clients, UBS outlined a series of price targets suggesting a gradual decline in the EUR/NOK exchange rate. The bank's forecast indicates the pair will fall from current levels over the coming quarters.

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

Rationale and Market Context

The forecast comes after the Norwegian krone has recently weakened, giving back approximately half of its year-to-date gains against the euro. According to UBS, this retracement was driven by pressures from falling oil prices and heightened expectations for global interest rate hikes.

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However, UBS believes these headwinds are temporary. The bank attributes its bearish stance to what it calls a "supportive external environment" that should favor renewed krone strength. Additionally, analysts point to an "attractive carry," where investors can potentially profit from the interest rate differential between the two currencies.

Implications for Investors

Based on its outlook, UBS advises clients to consider selling the EUR/NOK pair at current levels or to sell into any rallies, a strategy known as "selling the upside." This suggests that any short-term strength in the euro relative to the krone could present a favorable entry point for traders anticipating a longer-term decline.

The forecast implies that the fundamental drivers, including favorable economic conditions and yield advantages, are expected to outweigh the recent negative sentiment. Investors will be watching commodity prices and central bank policies closely as key indicators for the krone's performance.