NOK Traders Eye Norway GDP, Crude Oil Prices, Trade War Talks

NOK TALKING POINTS – NORWAY GDP, CRUDE OIL PRICES, NORGES BANK

• Norwegian QoQ GDP: expecting a 0.2 percent rise

• Trade wars and global sentiment weigh on crude oil

• Risk out of EU to increase pressure on central bank？

See our free guide to learn how to use economic news in your trading strategy!

Norwegian Krone traders will be closely watching Norway‘s upcoming GDP data, a 0.2 percent quarter-on-quarter rise expected. That is lower than the previous 0.5 percent increase. Relative to developed countries, Norway’s economy has been faring well; So much so that its central bank remains one of the most hawkish monetary authorities in the world. But for how long？

The source of Norway‘s economic strength is also its weakness. The economy’s export-driven nature and heavy reliance on the petroleum sector leaves it exposed to abrupt changes in global sentiment. The most recent crack in US-China trade relations illustrates how crude oil prices can be notoriously sensitive to shifts in market mood. The Norwegian Krone also found itself under pressure as US-China trade tensions escalated.

There is also growing political and economic risk emanating out of Europe, Norways biggest client. Brexit still remains a headline risk for European markets while the rise of Eurosceptics is making for an unsettling political landscape. To learn more about how politics affect markets, you may follow me on Twitter @ZabelinDimitri.

If regional and global fundamental themes continue to decay, it could pressure the Norwegian economy and force the central bank to adjust its rate hike cycle. The Krone would almost certainly suffer in this environment, particularly against the US Dollar because of how these risks may generate a demand for the Greenbacks unparalleled liquidity.

Looking ahead, the continuation of the US-China trade war drama will likely continue to be a global headline risk alongside Brexit as the clock for both runs out. Regional and domestic growth indicators will likely continue to impact the Krone, though international themes may overshadow the potential volatility-inducing results of some peripheral Norwegian data.

CHART OF THE DAY: ONE-WEEK IMPLIED VOLATILITY MAY 8, 2019