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29 Oct 2015
EUR/NOK seen at 8.80 in three months - UBS
FXStreet (Córdoba) - Norwegian labor and retail sales data released Wednesday disappointed market expectations and led to the EUR/NOK rising above 9.40 for the first time in three weeks. But the details of the data do not look especially worrying, according to the UBS analyst team.
Key Quotes
“We still see one to two volatile months ahead that should slowly confirm that the worst is over for Norway's economy. We believe that a lot of negative news is already priced into the NOK, which we see falling to 8.80 against the EUR over three months”.
“But the road to 8.80 will be bumpy and might take the entire three months. The main risk for the NOK remains the oil price and the oil downturn weighing on the mainland economy more than expected”.
“The latest Labor Force Survey reveals that unemployment rose to 4.6% in August from 4.3% in July, mainly due to more people entering the workforce. Employment is actually increasing. So while it is sluggish, the labor market more or less reflects our view that the economy will bottom out by the end of the year. Wednesday's retail sales data for September was disappointing – it fell by 0.2% from a year ago – and suggests that weak consumer confidence is having a bigger impact than anticipated. But Norwegian retail sales data is notoriously volatile, so it needs to be taken with a grain of salt”.
“The broader trend remains in line with Norwegian GDP growth slowing to roughly 0.5–1% year-over-year in the last quarter of 2015”.
Key Quotes
“We still see one to two volatile months ahead that should slowly confirm that the worst is over for Norway's economy. We believe that a lot of negative news is already priced into the NOK, which we see falling to 8.80 against the EUR over three months”.
“But the road to 8.80 will be bumpy and might take the entire three months. The main risk for the NOK remains the oil price and the oil downturn weighing on the mainland economy more than expected”.
“The latest Labor Force Survey reveals that unemployment rose to 4.6% in August from 4.3% in July, mainly due to more people entering the workforce. Employment is actually increasing. So while it is sluggish, the labor market more or less reflects our view that the economy will bottom out by the end of the year. Wednesday's retail sales data for September was disappointing – it fell by 0.2% from a year ago – and suggests that weak consumer confidence is having a bigger impact than anticipated. But Norwegian retail sales data is notoriously volatile, so it needs to be taken with a grain of salt”.
“The broader trend remains in line with Norwegian GDP growth slowing to roughly 0.5–1% year-over-year in the last quarter of 2015”.