According to analysts at Nordea Markets, things are heating up for the NOK as a plummeting oil price and weakening consumption growth suddenly speaks in favour of a downwards revision of the rate path by Norges Bank in December.
Key Quotes
“Just a month ago several factors argued in favour of a hawkish December path.”
“The list of potential NOK negatives has though started to evolve at a worrisome speed in recent weeks. The oil price now indicates as much as 10% downside risk for the NOK, but the plummeting oil price is not the only factor weighing on the NOK short term.”
“Usually the structural liquidity tide turns right about now, meaning that the Norwegian commercial banking system will be flooded with cheap NOK liquidity over year-turn (this year at least 10bn NOK will flow in to the system from now and until New Year). Norge’s Bank allows cheap NOK liquidity to prevent a skyrocketing NIBOR/OIS spread due to an expensive USD over year-turn. This is an underappreciated driver of the sluggish December NOK seasonality.”
“The housing market is another renewed concern for the NOK. The inventory-to-sales ratio on the Norwegian housing market has rolled over recently, which usually hints at an upcoming weaker trend in the yearly house price trend. Currently the inventory-to-sales ratio points to roughly unchanged house prices year on year (compared to the current 2.5% pace).”
“Broader trends in EUR/NOK and Norwegian house prices usually go hand in hand (likely driven by an exogenous factor). The NOK has recently traded slightly on the expensive side of the housing market developments. A recoupling of trends should lead EUR/NOK higher.”
“We go long EUR/NOK and target at least a move to 9.80 before year-end but don’t rule out a move of >5% over the next 1-1.5 months.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD: The hunt for the 0.7000 hurdle
AUD/USD quickly left behind Wednesday’s strong pullback and rose markedly past the 0.6900 barrier on Thursday, boosted by news of fresh stimulus in China as well as renewed weakness in the US Dollar.
EUR/USD refocuses its attention to 1.1200 and above
Rising appetite for the risk-associated assets, the offered stance in the Greenback and Chinese stimulus all contributed to the resurgence of the upside momentum in EUR/USD, which managed to retest the 1.1190 zone on Thursday.
Gold holding at higher ground at around $2,670
Gold breaks to new high of $2,673 on Thursday. Falling interest rates globally, intensifying geopolitical conflicts and heightened Fed easing bets are the main factors.
Bitcoin displays bullish signals amid supportive macroeconomic developments and growing institutional demand
Bitcoin (BTC) trades slightly up, around $64,000 on Thursday, following a rejection from the upper consolidation level of $64,700 the previous day. BTC’s price has been consolidating between $62,000 and $64,700 for the past week.
RBA widely expected to keep key interest rate unchanged amid persisting price pressures
The Reserve Bank of Australia is likely to continue bucking the trend adopted by major central banks of the dovish policy pivot, opting to maintain the policy for the seventh consecutive meeting on Tuesday.
Five best Forex brokers in 2024
VERIFIED Choosing the best Forex broker in 2024 requires careful consideration of certain essential factors. With the wide array of options available, it is crucial to find a broker that aligns with your trading style, experience level, and financial goals.