Norway's Robust YTD Performance Masks Weak EUR/NOK Valuation

Norges Bank can focus on domestic factors due to Norway's year-to-date performance in the Norwegian Krone (NOK) against the Euro (EUR), according to BNY's Geoff Yu.

The surge in oil prices this year has improved Norway's terms of trade, but EUR/NOK gains have pushed up the I-44 import price index.

While stronger oil prices have had a positive impact on Norway, the high investor holdings and weaker valuation case make short EUR/NOK trades unattractive, with risks tied to wages and inflation expectations, Yu warns.