Date: 24 Aug 2018

Data on Thursday from Statistics Norway non-oil Norwegian GDP increased by 0.5 per cent in Q2 2018 from Q1, in line with the consensus forecast of economists polled by Reuters. Additionally a separate Statistics Norway showed of oil industry intentions indicated further growth in investments in Norway’s energy sector in 2019 which will only help Norwegian GDP growth. The Norwegian central bank has previously indicated it is likely to raise interest rates next months, lifting them from their current record low level of 0.5 per cent. Yesterday’s information from Statistics Norway might even lead markets to start thinking about the possibility of future hikes. But perhaps what’s striking from a currency market perspective is that while the Norwegian krone (NOK) is at the top end of its one-year range versus its Swedish neighbour (SEK) (NOKSEK), and (in line with the broader USD move seen in the latter part of this week) had made some gains against the greenback (USDNOK), the NOK gave back some gains versus the euro (EURNOK) yesterday. Whether that blip up in EURNOK was more a reflection of euro strength than NOK weakness, or perhaps whether it was just a position-driven move,  is open to debate but whatever the driver the EURNOK moved up. The question for traders is whether that move will be sustained or whether it merely offers better levels to enter (or indeed re-enter) a short EURNOK position. It’s a matter of personal choice but traders might at least wonder how far the krone can weaken against the euro if (when?) Norway is about to raise interest rates (and possibly signal a steeper future path for rate increases) when euro zone benchmark interest rates are clearly not going to go up anytime soon.

by Neal Kimberley, External Currency Analyst.