Could Oil Fire Up The NOK?
It remains to be seen whether oil-importing nations will heed Tuesday’s call from the US State Department for countries to cut oil imports from Iran to zero by November, but it does add a new context to the issue of oil demand and supply, following the weekend agreement of OPEC and others to raise output to some degree. Certainly the oil price rose following the US call. In the currency space the Norwegian krone (EURNOK, NOKSEK) could be a beneficiary of the situation. Den Danske bank made the point on Wednesday that “supply-driven oil moves typically matter less for NOK than demand-driven ones. Nevertheless, we note that if supply concerns keep upward pressure on oil prices despite OPEC aiming to remove ‘over compliance’ to the output deal, it adds another argument as to why notably NOK/SEK is set to hold up well in the current environment of trade concerns.” That second point on trade concerns might equally resonate with traders who have reservations about the deterioration in trade relations between the United States and the European Union. Traders could conclude that there are more reasons, presently, to favour the NOK than not.
Written by Neal Kimberley, External Currency Analyst.