NOK: Hot core inflation takes August cut off the table – ING

Norway released June CPI figures this morning, ING's FX analyst Francesco Pesole notes.

Return to 11.50 Xin EUR/NOK may be in line with fundamentals

"While headline inflation undershot expectations for an increase by staying flat at 3.0%, underlying CPI accelerated from 2.8% to 3.1%, faster than the consensus 3.0%. Remember that a key argument for Norges Bank’s surprise June rate cut was that underlying inflation was back below 3.0%. As that drop did not prove sustainable, there is little room for Norges Bank to cut again already in August."

"EUR/NOK has been little touched by the release, as markets were already pricing in little to no chance of an August cut, while the dovish tilt in June may prevent substantial unwinding of September rate cut bets."

"Our EUR/NOK view is bearish. The impact on risk sentiment from Trump’s new wave of tariff announcements has been minimal, and the pair is trading 3.0% above its short-term fair value according to our model. This is primarily due to the euro’s outperformance, which may however lose some steam as concerns about EZ growth may arise in the coming months. A return to the 11.50 handle in EUR/NOK would be entirely in line with fundamentals."