NOK remains too cheap for the Norges Bank
Sept 30 (Reuters) -Despite forward guidance from Norway's Norges Bank suggesting the possibility of a rate cut in December, expectations are for a "no change" decision and the main reason will be the weakness of the crown.
The NOK is too cheap and even with the central bank's hawkish stance EUR/NOK and NOK/SEK look poised to move further against the crown.
Despite easing domestic inflation, core prices remain too high and with a weak currency still fanning the CPI flames, the Norges Bank will be in no hurry to join the global trend towards lower rates.
A rate cut before the year is out could trigger a rally in EUR/NOK, slowing any softer bias for inflation. The Norges Bank could also justify holding rates higher for longer by pointing to the resilience of the Norwegian economy.
Consumers continue to buy, the oil sector is strong and fiscal stimulus is supporting economic growth.
The EUR/NOK short-term technicals lean towards a period of consolidation while four support levels remain intact. A daily Ichimoku cloud base is at 11.6975, the 100-day moving average is at 11.6610, the Sept. 24 low at 11.6010 and 200-day moving average is at 11.5815.
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EUR/NOK daily Ichimoku chart: https://tmsnrt.rs/47M5Qwl
(Peter Stoneham is a Reuters market analyst. The views expressed are his own)
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