EUR/NOK flows: Norges Bank sticks to script, but NOK focused more on Iran/oil
Norges sticks to script on upside inflation risks and likely need for a further hike
Yet it also acknowledges Iran deal and that energy drop could weaken pressures
Overall EUR/NOK still correcting 2026 downtrend on Iran/ ToT trade unwind/profit-taking
Norges Bank broadly as expected with policy left unchanged and reiterating that it sees somewhat tighter monetary stance will be needed to bring inflation down with inflationary pressures somewhat stronger than expected, such that it will likely be necessary to raise the policy rate at one of the forthcoming meetings.
It does acknowledge though the recent MoU and that ‘if energy markets normalise quickly, external price pressures may prove weaker than currently assumed’.
EUR/NOK net little moved – dipping in and then covering out of the announcement. The commentary is largely as expected if maybe a tad more strident but is anyway at most no more than is currently already factored into the money market.
The acknowledgement of uncertainty and that Iran developments is also relevant. We see policy as already restrictive and that the Norges Bank can be back to cutting rates next year.
Indeed, NOK overall still currently focused more on corrective unwinds and profit taking on prior Iran/term-of-trade based trades. EUR/NOK broke its 2026 downtrend, along with the break lower in oil, and the corrective move could have further to run.