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Investing.com - Goldman Sachs expects both Norwegian krone (NOK) and Swedish krona (SEK) to strengthen against the U.S. dollar in coming months, with a slight preference for SEK, according to a recent research note.
The investment bank views the current market environment as supportive for Scandinavian currencies, citing ongoing dollar hedging programs and global reallocations away from U.S. assets as beneficial trends. Goldman Sachs also anticipates both EUR/NOK and EUR/SEK exchange rates to gradually decline toward the firm’s three-month targets.
The bank’s outlook is tempered by potential risks, noting that both currencies, particularly NOK, could underperform significantly during periods of reduced risk appetite or continued U.S. economic slowdown. For the Norwegian krone, these cyclical risks are further complicated by Goldman’s bearish outlook on oil prices in the coming months.
Goldman Sachs identifies the Norwegian general election on September 8 as a key risk event for NOK. The firm highlights that the most significant currency impact could come from the success of parties advocating for looser restrictions on channeling foreign currency revenues from Norway’s sovereign wealth fund back into NOK and the domestic economy.
The Progress Party in Norway has been campaigning on this platform, which could create upside potential for the currency if successful. However, Goldman considers significant wealth fund reform a low-probability outcome, citing historical resistance to changing the fund’s mandate and current polling that suggests no single party is likely to achieve a majority.
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