NOK/SEK Bullish: First G10 Central Bank to Hike Rates

NOKSEK Price Analysis & News

• NOK Likely to Rise if Norges Bank Signals September Hike
• NOK/SEK Cheap vs Oil and Spreads

The Norges Bank are due to provide their latest monetary policy report (0900BST, June 17th) and while no change is expected, the focus will be on the central bank’s signalling on when there will be rate lift off. After the central bank announced in March that interest rates are likely to rise in H2 2021, the debate has now shifted towards whether that rise will take place in September (Q3) or December (Q4).

DATA: Economic data remains robust for the Norwegian economy, the unemployment rate has fallen to 3.3%, lower than the Norges Bank’s projections had assumed. That said, while growth contracted in Q1 and inflation has slipped in recent, this is in line with the central bank’s forecast and with regional survey’s revised higher annual wage growth in 2021 to 2.7% from 2.3%, inflation risks are tilted to the upside. Alongside this, oil prices have continued to go from strength to strength with Brent crude futures trading at multi-year highs. That in mind, this would argue for a rate hike in Q3.

NOKSEK is trading at rather cheap levels against both oil prices and interest rate differentials, therefore highlighting value in the cross heading in the Norges Bank. Elsewhere, positioning does not appear to be an issue either as weekly FX flows show that foreign banks (proxy for speculative flows) have been consistent NOK seller sellers over the past six weeks.

NOKSEK vs Oil and Rate Differentials

Source: Refinitiv

NOK Weekly FX Flows

NOKSEK Technicals

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