Norwegian Krone: How are energy and a tight gas market providing support? – Danske Bank

Expectations that Norges Bank will keep interest rates on hold at its November meeting were reinforced by Norway's October unemployment rate, which held at 2.0%, according to Danske Bank analysts. With elevated energy risk premiums and tight conditions in the European gas market continuing to underpin the Norwegian Krone, Norges Bank opted to cap daily NOK sales at 300mn, below the larger volumes suggested by projections.

How Are Tight Labour Conditions and Energy Supporting NOK?

"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.)