Energy and tight gas market underpin Norwegian Krone – Danske Bank

Norway's unemployment rate held at 2.0% in October. Danske Bank analysts say the reading strengthens expectations that Norges Bank will leave interest rates unchanged at its November meeting. Although projections pointed to larger daily NOK sales, the central bank capped them at 300mn. Meanwhile, elevated energy risk premiums and tight conditions in the European gas market continue to underpin the Norwegian krone.

NOK Supported by Tight Labour and Energy Markets

"In Norway, the seasonally adjusted unemployment rate was unchanged at 2.0 % in October, in line with our expectation, and confirms that the labour market remains tight despite weaker growth."

"This is marginally lower than Norges Bank's forecast from the latest MPR in Sep (2.1%), but not enough to alter our expectations of unchanged rates at next week's meeting."

"Also in Norway, Norges Bank announced it will sell NOK 300mn/day in November. The revised oil-adjusted deficit for 2026 (down NOK 16.5bn) should in isolation have pushed daily sales to around NOK 850mn/day, but Norges Bank and the Ministry of Finance likely chose to smooth flows via the Petrobuffer Fund given they will need to buy NOK in 2027. A sensible approach that explains the more modest pace.

"The NOK has continued to strengthen, supported mainly by an elevated energy risk premium and a very tight European gas market."

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