The Norges Bank is poised to fireside a possible “shot heard ‘round the world” in the week .

With most major developed central banks barely beginning to “talk about talking about” normalizing monetary policy (see our full FOMC meeting preview for more), the Norges Bank is poised to fireside a possible “shot heard ‘round the world” in the week .


Between a comparatively well-managed response to the COVID pandemic and oil prices rallying to 2+ year highs, the oil-dependent Norwegian economy is recovering faster than many of its peers. Indeed, last month’s Regional Network Survey within the country showed a sharply accelerating growth outlook with businesses expecting “substantial output growth ahead” across all sectors. The report also revealed plans to extend investment and employment additionally signs of rising cost pressures. In other words, the Norwegian economy is humming along a poised to accelerate over the approaching months, raising the danger that the Norges Bank’s crisis-driven 0% rate of interest is just too easy and risks creating detrimental inflation.


Heading into Thursday’s meeting, traders and economists expect the Norges Bank to get the groundwork for a rate hike at its September meeting, which might make it far and away the primary financial institution within the G10 to start out normalizing monetary policy. Perhaps more importantly for markets, the bank could hint that it plans to start a cycle of rate hikes, with another raise possible as soon as December if the economy remains strong.


Technical view: USD/NOK


As any new FX trader quickly learns, changes to financial institution interest rates are arguably the most important catalyst for currency market moves. While Governor Øystein Olsen and Company haven’t been shy about communicating their desire to normalize policy in recent months, the stark contrast between an imminent rate hike (or two) from the Norges Bank and therefore the remainder of the developed world unlikely to boost interest rates until late 2022 at the earliest could still boost the NOK against its rivals.


Technically speaking, the Norwegian krone has been the second-strongest major currency thus far this year, behind only the similarly oil-driven Canadian dollar . watching the USD/NOK chart, rates formed a double top in Q4 of last year and are trending gradually lower (showing NOK strength against the USD) ever since. The pair remains below both its downward-trending 50- and 100-day EMAs, and therefore the slight recovery over the last six weeks appears corrective, instead of marking an end to the longer-term bearish trend:


If the Norges Bank does strike a hawkish tone and hint at multiple rate hikes this year, USD/NOK could resume its longer-term downtrend. therein case, more aggressive traders might want to think about short positions on an opportunity of last week’s low near 8.25 for a possible continuation toward 8.00 in time. Conversely, albeit the Norges Bank is more cautious than some expect, prolonged weakness within the NOK (strength in USD/NOK) is seen as unlikely given the high likelihood that Norway will start the trail to monetary policy normalization far before its major developed rivals.


Check out my colleague Joe Perry’s thorough “Currency Pair of the Week” report on USD/NOK for more insight on this pair!