USD/NOK Outlook: Bearish, as the rate is below its recent average and near recent lows, largely due to USD weakness.
Key drivers:
• Rate gap: The Federal Reserve's pause on rate cuts contrasts with Norges Bank's sustained policy rate, supporting NOK strength.
• Risk/commodities: With oil prices rising above average, NOK, being linked to oil exports, could gain ground; however, broader USD weakness is dominating.
• One macro factor: Efforts to reduce reliance on the USD in global trade are increasing, further pressuring the dollar.
Range: USD/NOK is likely to drift within the current 3-month range.
What could change it:
• Upside risk: A significant rebound in US factory activity could strengthen the USD.
• Downside risk: Escalating geopolitical tensions may lead to further declines in USD value as investors seek safety.
