SCANDIS: Near-term Risks In NOKSEK Remain To The Downside

The aforementioned bounce in crude oil futures on the latest Trump comments provides light support to NOK, helping NOKSEK away from session lows of 0.9313. That said, this afternoon’s downside price action has affirmed that the near-term risks in the cross are skewed to the downside. Support at the Sep 5 low of 0.9324 has been pierced, clearance of which would quickly expose clustered support around 0.9295 (Aug 11 low) and 0.9300 (round-number). Beyond this zone, downside targets appear scant until ~0.9200. 

• Volatility in NOKSEK has been limited since the middle of October. Early November Norges Bank/Riksbank decisions brought few surprises, with Scandi FX mostly dictated by swings in global risk sentiment.
• SEB have written that “despite a correction lower in NOK/SEK during Q4, there is still scope for the pair to move even lower, according to seasonal trends in Q4. Looking further ahead, the first quarter tends to support the NOK/SEK, hence Q4 presents a buying opportunity for the pair”.
• Next week’s Scandi calendar is headlined by Q3 GDP reports in both Norway and Sweden.
• Consensus sees Norwegian mainland GDP at 0.4% Q/Q (vs 0.6% prior), in line with Norges Bank’s latest projection. Alongside the GDP breakdown, there will be a lot of focus on national account wage metrics. Analyst expectations for Norges Bank’s terminal rate range from 4.00% (i.e. no more cuts) down to 3.25%, so incoming data remains very important to monitor.
• Swedish GDP is seen at 1.1% Q/Q, which would be in line with the flash release presented at the end of October, and well above the Riksbank’s 0.5% September MPR projection. We caution that the flash release can often be heavily revised, but acknowledge that growth data has been improving in recent months. The bar to a near-term Riksbank rate change is high, but we’ve highlighted that the risk of a hike back to 2% exceeds that of another cut on a 12-month horizon.

Figure 1: NOKSEK Since 2022 (Source: Bloomberg Finance L.P)