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29 Jan 2016
Mixed Norwegian data keeps EUR/NOK elevated - UBS
FXStreet (Córdoba) - Friday's multiple data releases from Norway failed to strengthen the NOK, which is still relying on market risk sentiment and oil prices for now. According to UBS analyst team, the data indicates that the Norwegian recovery story may take a bit longer than previously assumed. “We still see markets pricing EUR/NOK too high compared to fundamentals, but are also monitoring risks of a further delay of Norway's economic recovery.”
Key Quotes
“The main disappointment has been a 1.3% month-over-month drop in Norwegian retail sales. This brings them back to the September level and makes 2015 a year of flat sales in real terms. Registered unemployment continued rising slowly in January, mainly due to more job losses in oil regions. However, vacancies seem to have turned over recent months, shooting up in January and possibly indicating the end of rising unemployment rates.”
“While Norway's economic data may currently lack vigor, very easy monetary conditions should still prevent a bigger impact from the oil downturn on the rest of the economy. Hence, EURNOK remains too high compared with economic fundamentals and interest rates, as markets still have a very pessimistic view on the Norges Bank rate outlook. The European Central Bank and the Bank of Japan have clearly indicated their readiness to deliver more monetary easing. Sweden may be forced to follow in their footsteps. This stands in stark contrast to the already high Norwegian inflation rate and the Mainland economy's ability so far to withstand the oil downturn.”
“We thus still see considerable room for EUR/NOK to drift lower to 9.00 as markets re-price over the next three months.”
Key Quotes
“The main disappointment has been a 1.3% month-over-month drop in Norwegian retail sales. This brings them back to the September level and makes 2015 a year of flat sales in real terms. Registered unemployment continued rising slowly in January, mainly due to more job losses in oil regions. However, vacancies seem to have turned over recent months, shooting up in January and possibly indicating the end of rising unemployment rates.”
“While Norway's economic data may currently lack vigor, very easy monetary conditions should still prevent a bigger impact from the oil downturn on the rest of the economy. Hence, EURNOK remains too high compared with economic fundamentals and interest rates, as markets still have a very pessimistic view on the Norges Bank rate outlook. The European Central Bank and the Bank of Japan have clearly indicated their readiness to deliver more monetary easing. Sweden may be forced to follow in their footsteps. This stands in stark contrast to the already high Norwegian inflation rate and the Mainland economy's ability so far to withstand the oil downturn.”
“We thus still see considerable room for EUR/NOK to drift lower to 9.00 as markets re-price over the next three months.”