The Norwegian krone strengthened after a sharp rise in Norwegian CPI, based on January data released on Tuesday. This shift led markets to remove expectations of any Norges Bank rate cut in 2026.
The move was described as premature, with inflation in Norway described as volatile. If inflation returns to 3.0% in coming months, expectations for a rate cut by summer may return.
EUR/NOK was described as fairly valued in the short term after a more hawkish repricing of Norwegian rate expectations. Under this view, a more dovish development would be needed to weaken the krone’s momentum.
Attractive domestic rates were cited as a factor that can support the krone if broader risk sentiment steadies. A preference for NOK over SEK was stated for the near term.
The article notes it was produced using an Artificial Intelligence tool and reviewed by an editor.
The Norwegian krone has rallied hard following the surprise January inflation report released this Tuesday. That report showed a jump in core CPI to 4.2%, prompting markets to completely price out any rate cuts from Norges Bank for the remainder of 2026. This has pushed the EUR/NOK exchange rate down towards the 11.35 level.
We think this is a premature move by the market. We saw similar inflation volatility throughout 2025, where sharp monthly increases often softened in the following quarter as energy prices normalized. We expect a similar pattern now, with inflation likely to return towards 3.0% by the summer, which would bring rate cut discussions back into focus.
For now, however, it is difficult to bet against the krone’s momentum. With the Norges Bank policy rate holding firm at an attractive 4.5%, the currency offers a significant yield advantage. Until we see a dovish catalyst, like a much weaker inflation print next month, the krone should remain supported, especially if global equity markets stabilize after this week’s dip.
Derivative traders might consider selling short-dated EUR/NOK calls to collect premium, taking advantage of the krone’s current strength. For those who share our view of a summer reversal, buying longer-dated call options on EUR/NOK with a June or July expiry could be a prudent strategy. This positions for a potential dovish repricing without fighting the strong near-term trend.
