Bias: bearish-to-range-bound, as the USD is currently below the 90-day average and in the lower half of the 3-month range.
Key drivers:
• Rate gap: The Federal Reserve's potential rate cuts later this year contrast with Norges Bank maintaining higher interest rates, which supports the Norwegian Krone.
• Risk/commodities: Oil prices are above their average, which typically supports the NOK given Norway's status as a major oil exporter. However, ongoing volatility could impact this relationship.
• Macro factor: Norges Bank's recent hawkish stance indicates continued high rates, delaying any cuts until at least March, which adds stability to the NOK.
Range: The USD/NOK is likely to hold or drift within its current range, influenced by the balance of USD weakness and NOK support from higher rates.
What could change it:
• Upside risk: A shift in USD policy outlook from the Federal Reserve could strengthen the dollar.
• Downside risk: A substantial drop in oil prices could weaken the NOK further.
