With increasing speculation that Norges Bank will be forced to cut rates in June, the Norwegian Krone has struggled to sustain any significant gains versus its major peers. The Krone appreciated significantly after the Norwegian central bank avoided cutting rates in May, but the advance was short-lived thanks to the softer-than-expected March Consumer Price Index.
Oil prices have been subject to significant fluctuations over recent months as traders attempt to price-in oversupply against mounting tensions in oil producing countries. Many industry experts have forecast an oil price recovery, however, as the US rig count drops and fighting in the Middle East causes supply concerns. ‘The decrease in drilling activity by more than half since the beginning of the year to its lowest level since August 2010 has not yet been reflected in the hard production data,’ Commerzbank said in a note. ‘We see considerable correction potential for the oil price because it has been driven up by the expectation of falling US supply.’
Should oil prices strengthen in line with predictions, the Krone will rally versus most of its major peers. However, if recent times are used as a gauge then oil prices are likely to continue changing for some time to come.
At the beginning of the week beginning Sunday 17
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May, the Norwegian Krone edged lower versus the Pound, Euro and US Dollar. The fractional downtrend can be attributed to ongoing speculation that the Norges Bank will cut rates during the next policy meeting.
Looking ahead, there will be several Norwegian data publications of interest over the coming month. Of particular significance will be Gross Domestic Product data, due for publication on Wednesday 20
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May. On the year, first-quarter GDP is forecast to improve by 1.6%. On a quarterly basis, GDP is expected to edge higher by 0.1%.
In addition to GDP; Unemployment Rate, Retail Sales, Loan Growth, NIMA Manufacturing PMI, Current Account, Industrial Production, Manufacturing Production and Balance of Trade should provoke Krone volatility.
June 18
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will see the Norges Bank Interest Rate Decision. With ever-increasing speculation that the bank will cut the cash rate by 25 basis points, the preceding data publications will be of paramount importance. Should the data print poorly, Norges Bank will be very likely to ease policy.
Over the past month, the Pound Sterling to Norwegian Krone (GBP/NOK) exchange rate was trending within the range of 11.1332 – 11.9214.