USD/NOK Outlook:
Bearish, as the rate is below its recent average and nearing recent lows with notable pressure from the US economic landscape.
Key drivers:
- Rate gap: The US Federal Reserve has paused interest rate cuts, while Norges Bank maintains a cautious approach to reduce rates, highlighting a diverging monetary policy path.
- Risk/commodities: Oil prices remain elevated, trading above average, which supports the NOK since Norway is a significant oil exporter.
- Macro factor: Ongoing geopolitical tensions have prompted a "Sell America" trend, leading investors to reduce their USD exposure amid concerns over US trade policies.
Range:
The USD/NOK is likely to drift within the recent range, staying below the average, but without significant moves to test extremes in the short term.
What could change it:
- Upside risk: Improved US economic data could spur renewed demand for the dollar.
- Downside risk: Escalating geopolitical tensions could prompt further outflows from the USD, pushing the rate lower.
