Rabobank’s Senior FX Strategist Jane Foley argues that higher energy prices and a more hawkish Norges Bank stance are supportive for the Norwegian Krone (NOK). Norway’s strong Oil and gas export position and limited domestic vulnerability to the current energy crisis underpin NOK resilience. She anticipates further NOK strength versus Euro and Pound, looking for EUR/NOK to resume its earlier downtrend and recommending selling GBP/NOK rallies toward 12.50 over a 6–9 month horizon.

Energy exports and Norges Bank repricing

“Higher energy prices clearly improve the terms of trade for exporters of oil and gas. Among them is Norway. In terms of proven oil reserves, Norway doesn’t come close to being one of the world’s largest players, at around 20th in the global list.”

“Its position as a major energy exporter combined with this year’s switch to a hawkish central bank outlook are supportive factors for the NOK.”

“While the risks to both growth and inflation in Norway from the current energy crisis are significantly less than elsewhere, they did filter into the Norges Bank’s thinking at last week’s policy meeting.”

“Due to the repricing in market expectations regarding Norges Bank policy that took place in February, the move in March has not been as aggressive as in many other G10 markets, such as the UK.”

“On a 1-month view, the NOK is only the fourth best performing G10 currency after the USD, GBP and JPY.”

“We expect EUR/NOK to re-establish the downtrend evidence between January and Mid-March and favour selling GBP/NOK into rallies targeting a move to the 12.50 area on a 6-to-9-month view.”

“While USD/NOK will remain subject to flows dictated by the direction of USD safe haven flows related to the war, we expect the NOK to continue performing well vs. many of the G10 crosses this year.”

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