NOK stays vigilant on risk appetite – Danske Bank

Mikael Milhoj, Senior Analyst at Danske Bank, assessed the prospects for the Norwegian Krone and the upcoming key releases in the Nordic economy.

Key Quotes

“Global risk appetite remains key for the NO Kin the short term. However, we see upside risk to tomorrow’s domestic GDP and inflation prints. We expect mainland GDP at 0.7% Q/Q versus the consensus estimate of 0.6% Q/Q and Norges Bank estimate of 0.61%”.

“Looking ahead, we see the domestic balance of risk for growth skewed to the upside. Friday’s GDP release could well strengthen this view further. The inflation release (due at the same time) is associated with very high uncertainty. Our base case remains a small positive surprise at 1.5% Y/Y for the core measure relative to NB’s estimate of 1.4%. However, as always the details will be key, so look out for how ‘core-core’ fares”.

“Also, note that we will get another inflation print ahead of the March NB meeting where the central bank itself pencils in a rise to 1.7% y/y. Irrespective, if we are right in a ‘double surprise’ we think it would underpin market’s confidence in the NOK after the latest sell-off. We remain short EUR/NOK and long NOK/SEK”.