Bank of America expects the weakening of the Norwegian krone relative to the Swedish one by the end of the year and to the level of 0.95 in 2027 due to energy prices and internal factors of the economies.
Bank of America presented a forecast according to which the Norwegian krone will weaken against the Swedish krone. By the end of the current year a decline in the exchange rate is expected, and by 2027 it may reach the mark of 0.95. Bank analysts link this to the overall weakening of the US dollar, which supports both Scandinavian currencies. However, forecasts for energy prices remain below futures levels until 2027, which deprives the Norwegian krone of key support.
In the short term, winter risks to European gas prices may temporarily strengthen the Norwegian currency and delay its decline. Nevertheless, the bank's medium-term outlook remains negative for the Norwegian krone.
In favor of the Swedish krone, Bank of America notes the resilience of the European economy, growth in defense sector investments and acceleration of domestic demand in Sweden. The Riksbank's reaction to the weakening of the krona also adds support to it. The Swedish currency, according to fair value models, is among the most undervalued among G10 currencies.
Norway faces different conditions: slowing economic activity due to declining real wage growth and high interest rates. The Norwegian central bank, according to the bank's expectations, will keep current rates until mid-2027, and then begin cutting them in September. Three quarterly cuts are forecast, after which the key rate will be 3.75 percent by the beginning of 2028. The Norwegian krone is meanwhile assessed as one of the most overvalued G10 currencies.
Current valuation levels have not yet reached extreme values for an immediate reversal, however they confirm the medium-term forecast of weakening of the Norwegian krone relative to the Swedish one.