Economists at Nordea lean toward a weaker NOK after the CPI data release on Thursday.

Inflation is key

The NOK strengthened markedly at the beginning of July after the last NO CPI release came in hotter than expected while US and Euro Area CPI were a tad softer than expected. We don’t think we will see a repeat this week and we expect a somewhat weaker NOK after Thursday’s CPI data release.

Markets expect US inflation to pick up slightly to 3.3% YoY from 3.0%. More importantly, US core inflation is expected to fall to 4.7% YoY from 4.8%. If expectations are correct, markets could be relieved of a lower core figure and the USD could weaken somewhat.

A lower NOK print than feared and US inflation as expected points to a somewhat weaker NOK over the short-term. We still believe that EUR/NOK will take a turn higher in the months to come and hold our target at 11.50 until year-end.