Norway: Surprise cut while EUR/NOK likes shorts – Danske Bank

The Norges Bank (NB) cut by 25bps. Economists at Danske Bank are short on the EUR/NOK pair which is trading at 11.048.

Key quotes

“In a surprise move, NB this morning unanimously cut policy rates by 25bp sending the sight deposit rate to a new historical low of 0.0%.”

“NB now expects mainland GDP to drop by 5.2% in 2020 and to rise by 3.0% in 2021.”

“We expect NB to stay on hold for a long period, but probably start to hike rates during 2022.”

“We still like to be short EUR/NOK on the shift in underlying capital flows and the outlook for a gradual reopening of the global economy, which should support physical commodity demand.” 

“In light of the recent move lower in spot we re-lower our stop-profit to 11.50 (entry 11.89).”