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After huge volatility this year, mostly on the back of sharp movement in the oil price, USD/NOK is currently trading close to where it started the year while the krone it is around 6% lower vs. the euro compared with the beginning of January. Norges Bank is likely to retain a cautious tone at this week’s policy meeting, but it may be prepared to wind in its dovish policy guidance next month if the better economic conditions are sustained through the next set of data releases, per Rabobank.

Key quotes

“The result of a Reuters survey published this morning suggests that there is no expectation for a policy move from the Norges Bank at the August 20 meeting. That said, speculation has appeared that stronger than expected inflation data and house price inflation in Norway could result in the central bank sending less dovish policy signals in September.”

“Assuming that oil prices remain supported around current levels, the risk that the Norges Bank may be one of the first G10 central banks to step away from its ultra-accommodative signalling should lend the NOK some support.” 

“The June low in the EUR/NOK 10.43 area is likely to offer some support ahead of 10.40.”