Rates rising: Nordea's experts see continued upward pressure
Lead — Nordea's recent analysis highlights the ongoing upward pressure on interest rates due to persistent inflation driven by geopolitical factors and structural changes within economies. Per the full note , they foresee three additional rate hikes from the European Central Bank by the first quarter of 2027 as inflation in the euro area persists above targets, hovering around 3%. This outlook contrasts with broader market sentiment that lacks a consensus on the pace of rate increases, suggesting a cautious approach among traders. Investors should prepare for potential dislocations ahead as markets begin to price in these higher yields.
What the desk is arguing
The desk posits that the upward trajectory of interest rates will continue through the upcoming months, fueled by a resurgence in inflation not solely linked to energy prices. Nordea's economists highlight that structural inflationary pressures, including US trade policies and European defense spending, will necessitate further action from central banks. This is underpinned by their forecast of three ECB rate hikes by early 2027.
Supporting this view, the ECB's current rate is expected to increase by a full percentage point by early 2027, moving distinctly away from the zero-rate environment that characterized pre-pandemic years. Observations from Nordea suggest that historical context combined with current economic indicators presents a compelling case for sustained rate increases, necessitated by this inflationary landscape.
Where it sits in our coverage
Currently, our consensus target for the EUR/USD pair stands at 1.075, with a range between 1.04 and 1.12. Notably, jpmorgan anticipates a target of 1.10 for March 2026, while bofa takes a more cautious stance with a target of 1.04.
This bullish view aligns with jpmorgan's target, suggesting the desk's call is firmly in line with the upper bound of the spread, contrasting with bofa's more pessimistic outlook on the euro return.
How other firms see it
The majority of firms appear to be aligned with the view that further rate increases are on the horizon, with jpmorgan and db both forecasting similar upward movements in rates. Conversely, bofa remains skeptical about the pace of these hikes, advocating for a more conservative view regarding future rate changes.
This discourse intersects particularly with EUR/USD dynamics, indicating that traders should closely monitor ECB rate announcements as they continue to shape market sentiment amidst ongoing inflationary concerns. The trajectory of euro core inflation will also be key to gauging market reactions.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Nordean economists predict three more ECB rate hikes in 2026, indicating sustained inflationary pressure.
- 02Current inflation in the euro area is significantly above the ECB's 2% target, now at about 3%.
- 03The upward trend in interest rates is driven by both geopolitical tensions and structural economic changes.
Market implications
Watch for the EUR/USD to react to any ECB chatter regarding rate hikes, particularly if bullish sentiment increases. Key resistance levels are likely around 1.10, where traders may position themselves ahead of any rate announcements.
Risks to this view
A sudden shift in geopolitical issues that stabilizes energy prices could mitigate inflation pressures, forcing central banks to reconsider their rate increase trajectory. Should inflation data show signs of significant improvement, market sentiment may shift rapidly.
Markets and investment Rates rising: Nordea's experts see continued upward pressure 11-08-2026 3 min to read The article is based on Nordea's latest quarterly Rates and FX webinar, in which economists Jan Størup Nielsen and Samir Barki reviewed the key trends in financial markets and presented Nordea's forecasts for the remainder of 2026. Key takeaways: Inflation is back, and it's not just about energy. More rate hikes are coming.
The dollar is weakening, but the Danish krone remains relatively stable. The summer of 2026 has been anything but quiet in financial markets. The conflict in the Middle East, rising energy prices, the AI theme in equity markets, and a new chair of the US central bank have all left their mark on interest rate and currency markets.
That much was clear when Nordea economists Jan Størup Nielsen and Samir Barki recently presented their latest market assessment and interest rate forecast. Inflation is back as the big theme The central message from the webinar is clear: Inflation has once again become the dominant theme in the rates market. The sharp rise in oil and natural gas prices driven by the situation in the Middle East has pushed inflation in the euro area up towards 3%, significantly above the European Central Bank's target of 2%.
And according to Nordea's economists, this is not purely an energy story. Structural factors such as US trade policies, increased defence spending across Europe, and growing concerns about central bank independence are all contributing to sustained upward pressure on inflation. "We are not going back to the zero-rate environment of the years leading up to Covid-19," Jan Størup Nielsen emphasised during the webinar. ECB expected to raise rates three times Nordea expects the European Central Bank to raise rates a further three times: in September 2026, December 2026, and in the first quarter of 2027.
In total, this would represent a rate increase of one percentage point compared to the level before the current tightening cycle began. Markets are currently pricing in two to three additional rate hikes, and no one is talking about rate cuts. The question is not whether rates will rise, but how quickly.
The question is not whether rates will rise, but how quickly. Danish rates and mortgage rates to follow suit Danish interest rates are closely tied to developments in the euro area, and Nordea believes the peak has not yet been reached. A 10-year Danish swap rate, which currently stands at around 3.30 percent, is expected to move towards 3.60%, the highest level since the end of 2023.
This also means that Danish mortgage rates will likely rise further if Nordea's forecast holds true. Dollar weakens; Danish krone remains stable In currency markets, the dollar has lost ground over the summer, partly due to uncertainty surrounding the new US Federal Reserve Chair Kevin Walsh's monetary policy stance and a weaker-than-expected US labour market in July. Nordea expects the dollar-Danish krone cross to end the year around 6.44, a modest strengthening of the euro from the current level of 6.48.
The Swedish krona is benefiting from increased risk appetite and a solid Swedish recovery, while the Norwegian krone continues to face headwinds from falling energy prices. Nordea expects a Norwegian rate hike later in the year, as inflation in Norway remains above Norges Bank's target. Nordea continuously monitors developments in financial markets and publishes regular analyses and forecasts.
Stay tuned for our next Nordea Economic Outlook, which comes out on 2 September 2026. Watch the webinar on demand (in Danish): https://corporate-video.nordea.com/rente-og-valutawebinar-udsigter Get our Economic Outlook fresh off the press Sign up for the Nordea Economic Outlook 06-12-2024 Stay ahead of the curve with our expert economic insights and forecasts. Get the latest analysis on global and Nordic markets delivered straight to your inbox.
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