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11 Dec 2014
NOK drops 1% on Norges Banks’ surprise – Scotiabank
FXStreet (Barcelona) - Camilla Sutton CFA, CMT, Chief FX Strategist at Scotiabank, notes that NOK dropped 1% today as Norges Bank surprised the markets with a rate cut of 25bps due to deteriorating oil price.
Key Quotes
“NOK is weak, having dropped 1% today and 15% since the June 20 high in oil prices. Today, the Norges Bank unexpectedly cut interest rates by 25bpts to 1.25%, highlighting that the sharp fall in oil prices is negatively impacting the economic impact and that depreciation in NOK will only serve to dampen the impact. In addition, the central bank suggested that interest rates are likely to be left on hold until the end of 2016.”
“The combination of a dovish central bank, low growth and falling oil prices is currency negative; however the broad fundamentals of Norway are still relatively strong; accordingly once the current NOK weakening trend completes we would expect some retracement.”
Key Quotes
“NOK is weak, having dropped 1% today and 15% since the June 20 high in oil prices. Today, the Norges Bank unexpectedly cut interest rates by 25bpts to 1.25%, highlighting that the sharp fall in oil prices is negatively impacting the economic impact and that depreciation in NOK will only serve to dampen the impact. In addition, the central bank suggested that interest rates are likely to be left on hold until the end of 2016.”
“The combination of a dovish central bank, low growth and falling oil prices is currency negative; however the broad fundamentals of Norway are still relatively strong; accordingly once the current NOK weakening trend completes we would expect some retracement.”