USD/NOK Outlook:
The USD/NOK rate is currently below its recent average and near recent lows, suggesting a bearish outlook. Recent geopolitical tensions have supported the US dollar, but pressure remains on the dollar as expectations for easing from the Federal Reserve grow.
Key drivers:
• Rate gap: The Federal Reserve's interest rate cuts contrast with the steady stance of the Norges Bank, leading to a narrowing rate differential that could weigh on the USD.
• Risk/commodities: Oil prices are above average, but volatility remains high. The NOK is likely supported by these higher oil prices despite recent fluctuations.
• One macro factor: Rising Norwegian consumer inflation data has fueled optimism for the NOK, reducing expectations for a rate cut this year.
Range:
Expect the USD/NOK to drift within its recent range, potentially testing the lower end as market dynamics shift.
What could change it:
• Upside risk: A significant downturn in oil prices could severely impact the NOK, strengthening the USD.
• Downside risk: Strong US economic data, particularly around job growth, could enhance USD demand and pressure the NOK further.
