Taper talk: How FOMC will affect Norwegian KroneLea Jakobiak
A day after the Federal Reserve meets in the US, we’ll hear from its Norwegian equivalent, Norges Bank. It will discuss whether to keep interest rates on hold, but considering the country’s core inflation has jumped to 2.5%, Saxo Bank’s John Hardy thinks the central bank “must respond in some way”.
He says that hawkish expectations could strengthen the krone, especially against the euro, and also warns that the Norwegian currency is not immune from the FOMC outcome.
If the Fed surprises on the hawkish side, he believes there is room for upside in dollar versus the krone, in the short term. USDNOK is at a key support area of 5.90 at the moment, and he says its next move "seems to be large either way".
At its latest policy meeting in June, Norges Bank kept rates at 1.5% but suggested lower rates might be ahead.
Data out in August showed Norway's economy grew 0.2 percent in the second quarter.