Key Moments
- Rabobank’s Jane Foley highlights higher energy prices and a more hawkish Norges Bank as key supports for NOK.
- Norway’s strong Oil and gas export profile and relatively limited exposure to the energy crisis are cited as underpinnings of NOK resilience.
- Rabobank expects further NOK gains versus EUR and GBP, targeting EUR/NOK downside and recommending selling GBP/NOK rallies toward 12.50 over 6-9 months.
Energy Position and Currency Outlook
Rabobank’s Senior FX Strategist Jane Foley contends that the combination of elevated energy prices and a more hawkish policy stance from Norges Bank is constructive for the Norwegian Krone (NOK). Norway’s role as a notable Oil and gas exporter, alongside its relatively limited domestic exposure to the prevailing energy crisis, is viewed as a key source of support for the currency.
Foley expects NOK to continue gaining ground against both the Euro and the Pound. She anticipates that EUR/NOK will resume the downward trend observed earlier in the year and recommends using strength in GBP/NOK as an opportunity to sell, aiming for levels around 12.50 over a 6-9 month investment horizon.
Terms of Trade and Norway’s Energy Role
According to Foley, “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.”
She adds, “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.”
| Factor | Implication for NOK |
|---|---|
| Higher Oil and gas prices | Improved terms of trade for Norway |
| Norway’s energy export status | Structural support for NOK |
| Hawkish Norges Bank stance | Additional policy backing for the currency |
Norges Bank Policy Repricing
Foley notes that “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.”
She explains that “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.”
Relative G10 Performance and Cross Views
Foley points out NOK’s recent positioning within the G10 FX space: “On a 1-month view, the NOK is only the fourth best performing G10 currency after the USD, GBP and JPY.”
Looking ahead, she states, “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.”
On NOK’s relationship with the U.S. dollar, she comments, “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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