Jan 31 (Reuters) –A key focus for the krone market through 2024 will be global inflation trends and uncertainty surrounding central bank monetary policy, leading to increased market volatility.
FX option volatility premiums are near long term lows, but traders see the U.S. political outlook and potential for disruption of international trade, should Donald Trump be reelected as president, driving fresh options demand.
Coupled with the risk of a resurgent global inflation rate and increased FX volatility linked to U.S. presidential elections, the NOK could be in for a rocky ride.
If Middle East tension increases and triggers a squeeze in oil prices central bank rate cuts might be put on ice. A fresh energy price shock could underpin interest rates, keeping them high, weighing heavily on the NOK.
The krone needs low inflation and falling interest rates and as such the economic outlooks for Europe and U.S. will be pivotal.
EUR/NOK has played out a broad 11.0990 to 12.0060 range since June 2023 and the monthly chart shows the cross moving out sideways along the top of an Ichimoku cloud.
The long-term charts highlight weakness in the NOK and if uncertainty becomes a 2024 theme, choppy range trading at weaker levels could be the order for the NOK.
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(Peter Stoneham is a Reuters market analyst. The views expressed are his own)
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2024-01-31 12:56:25