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Investing.com -- Norges Bank is expected to keep interest rates unchanged at its Thursday meeting, following a dovish May CPI print that missed core inflation expectations and a Regional Network Survey showing resilient economic activity. These two crucial inputs suggest a potential rate cut in September, which markets have already priced into expectations.
The Norwegian krone (NOK) has resumed its appreciation trend against the euro (EUR) and gained slightly versus the Swedish krona (SEK). Currency movements following the announcement will likely depend on the central bank’s forward guidance - if policymakers push back against expectations of a September cut, the NOK could strengthen further, while confirmation of market expectations would likely result in a muted response.
Meanwhile, Sweden’s Riksbank is expected to implement another rate cut at its upcoming meeting. Market opinion remains divided on this outcome, but weak Swedish economic data and a dovish surprise from the flash May CPIF, which showed 2.3% year-over-year inflation, support further monetary easing.
The Swedish krona has remained relatively resilient despite uncertainty, helped by favorable repatriation flows. Analysts believe another rate cut would likely weaken the currency only briefly, maintaining the broader downward trend in the EUR/SEK exchange rate.
UBS views the NOK as good diversification away from USD and EUR for long-term investors, while recommending selling EUR/NOK upside above 11.70 for potentially better entry levels. For the Swedish currency, UBS views EUR/SEK as a short on rallies and favors selling the upside above 11.20 to gain exposure at more attractive levels.
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