The ongoing sell-off in brent crude futures continues to weigh on the NOK, prompting NOKSEK to push through key support at 0.9918 (trendline drawn from the December 2023 low). The cross is currently 0.5% lower today, after falling around 0.7% yesterday.

• A sustained breach of 0.9918 will open up 0.9846 (May 2 low) next.
• EURNOK and USDNOK have also extended higher today, currently 0.8% and 0.9% higher respectively.
• Whether the recent reversal in NOK’s fortunes will have material effects on the Norges Bank’s updated rate path (presented at the June 20 meeting) depends on the cut-off date for the June Monetary Policy Report forecasts.
• Nonetheless, although today’s NOK weakness is yet to be reflected in the I-44, the real exchange rate index sits below the Norges Bank’s March MPR projections and has fallen over 3% since the May meeting (i.e indicating a stronger-than-expected NOK).
• As such, the exchange rate should still have a downward effect on the updated rate path, despite the recent NOK weakness.
• However, the krone’s recent volatility and well-known sensitivity to risk sentiment and oil prices may still prompt the Norges Bank to remain cautious.
• Next Monday’s May CPI report provides one of the last key inputs before the June 20 meeting.