Societe Generale analysts note that Norway’s central bank, Norges Bank signalled higher rates are likely soon to bring inflation back to target, even at the cost of weaker growth. With policy held at 4% and a 225bp carry advantage, they highlight that this hawkish stance helped NOK/SEK reverse earlier losses and move back above 0.97 and EUR/NOK briefly slipped below the lower boundary of its multiyear range near 11.08, forming an interim trough around 10.92.

Hawkish tilt and carry back NOK/SEK

"Norway’s central bank took a leaf out of the RBA policy book and signalled that higher rates are around the corner to bring inflation back to target. The bank kept rates on hold at 4% and said that “it will likely be appropriate to raise the policy rate at one of the forthcoming monetary policy meetings. Instead of pencilling in at least one rate cut this year, it now projects at least one hike. "

"The bank placed emphasis on the fact that inflation has remained above target for several years now and that there are prospects for higher inflation ahead than previously projected. This can lead firms and households to plan for greater inflation persistence. Put differently, the bank is willing to sacrifice growth."

"The hawkish outlook and 225bp carry in favour of Norway caused NOK/SEK to reverse the losses of Monday and back up above 0.97. The March high is situated at 0.9851."

"EUR/NOK briefly slipped below the lower boundary of its multiyear range near 11.08, forming an interim trough around 10.92. It has since rebounded sharply toward the 50‑DMA, located near 11.30/11.35, which represents an important resistance zone."

"For confirming reduction in downward momentum, EUR/NOK will need to hold above 10.92 and develop a more durable base. A break above 11.30/11.35 would be crucial to highlight a broader recovery."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)