NOK: Oil and rates keep krone supported – Commerzbank

Commerzbank’s Antje Praefcke notes that the Norwegian Krone has been one of the best performers, helped by a hawkish shift in Norges Bank expectations after stronger January inflation and higher Oil prices. She still expects NOK appreciation in principle but warns that any easing of Middle East tensions and Oil correction could trigger a notable pullback in the currency.

Strong NOK but vulnerable to correction

"Whereas the market had previously anticipated the possibility of cuts, it now expects that there could even be increases over the course of the year."

"In principle, I have long assumed that the NOK should appreciate. However, I would be cautious in assuming that the recent gains will continue in their current form."

"On the one hand, interest rate expectations could be dampened if next week's inflation figures for February do not confirm the upward trend in prices."

"The conflict in the Middle East is certainly supporting the NOK, but a calming of the situation and a reopening of the Strait of Hormuz would in all likelihood lead to a rapid correction in the oil price and, accordingly, in the NOK."

"However, as long as tensions persist and oil prices remain high, the NOK will continue to be one of the winners of the crisis."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)