The USD/NOK price is hovering near its lowest level since January 2019 after the relatively hawkish Norges Bank central bank decision. It is trading at 8.4165.
Norges Bank decision
The Norges Bank was among the many central banks that delivered their interest rate decisions today. The others are Indonesia, Brazilian, Taiwan, and the UK central banks.
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In its decision today, the Norwegian central bank did what most analysts were expecting. It left the headline interest rate unchanged and hinted that the rate hike will come out earlier than expected. Precisely, it said that the hike would come in the latter half of the year, meaning that it will become the first developed country central bank to hike rates.
It based its case on the faster recovery of the Norwegian economy and that most adults will be vaccinated. Also, there are signs that the country’s economy is rebounding better than its peers. The bank said:
“There is substantial uncertainty surrounding the economic recovery ahead, but there are prospects that economic activity will approach a normal level earlier than projected in the December 2020 Monetary Policy Report,
The manufacturing, industrial, and retail sectors have all been in a recovery mode this year. The higher crude oil price has also helped since Norway is the biggest oil exporter in Western Europe.
As a result, the government expects the economy to grow by 3.7% this year and 3.6% in the following year. This is after dropping by 1.4% in 2020.
The USD/NOK is also reacting to yesterday’s Fed interest rate decision. The bank left interest rates and quantitative easing policies unchanged. While it expects the American economy to rebound, it guided to low-interest rates for the next two years.
USD/NOK technical forecast
The daily chart shows that the USD/NOK price has been in a sharp contraction in the past few months. It has fallen by more than 30% from its highest level in 2020. It is slightly below the 25-day and 15-day moving averages. And recently, it has formed a small descending triangle pattern.
Therefore, in the near term, there is a possibility that the pair will remain at the current level and then break-out lower because of the Fed and Norges Bank divergence.
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