FX Update: NOK as a microcosm of FX and global markets FX Update: NOK as a microcosm of FX and global markets FX Update: NOK as a microcosm of FX and global markets

FX Update: NOK as a microcosm of FX and global markets

Forex 5 minutes to read
John Hardy

Head of FX Strategy

Summary:  The Norwegian krone was at the confluence of a number of forces acting on global markets yesterday, and was a kind of microcosm of what is going on across markets. The profound decline and reversal in NOK offers some hope that at least the markets are trying to find some temporary stability at the moment.

A brief update today – please consult today’s Quick Take for a great news roundup and setting of today’s market and trading agenda and then today’s Saxo Market Call podcast for our latest take on what we are looking at ahead of this weekend.

Yesterday was another day full of wild swings in the market, one that generally saw the USD spiking to new highs across the board – a move that was thankfully reversed overnight as this is our key indicator for the ability of global markets to begin to calm. Yesterday, the Fed opened up swap lines to another long list of countries’ central banks, including, very important Norway.

We pull out Norway in our discussion today as it is the single currency at the confluence of the drivers that have been shaking global markets in recent weeks. The first key that brought NOK back from the brink was the abovementioned USD swap lines opening up and the Norges Bank indicating that it was ready to intervene in the market if necessary. The second key was the oil price vaulting higher from yesterday’s fearsome lows on the news that the US may look to mediate between Saudi Arabia and Russia in its ongoing price war. In short, the Norwegian krone is a kind of microcosm for whether markets can piece together some stabilization and even normalize somewhat, even as the Covid19 news is hardly likely to improve for many countries, including Norway, that are in the exponential upswing portion of their outbreaks.

By the way, after cutting rates by 50 bps just last week, the Norges Bank slashed the policy rate 75 bps further just this morning to take it to 0.25% - still matching the highest policy rate among G10 currencies. NOK hardly blinked as the other factors above dominate the situation for now

EURNOK has traded in a shocking 10% range over the last couple of sessions and is an excellent barometer of global risk appetite, trading as it does with considerations of global liquidity, the oil price and natural gas prices and the outlook for the global economy. EURNOK has likely put in a top for now if the oil price stabilizes and rises from here and could be set for further gains once the EU Covid19 outbreak fallout begins to bend in the right direction for Europe as a whole. Still, it will likely prove a bumpy ride for NOK traders, with near term risks that US overtures to mediate in the oil price war are rebuffed. It is clear from current and past price action that round price levels (11.00 – 11.50, 13.00, etc.) loom large in traders’ minds. 

Source: Saxo Group

Across the rest of FX, we continue to watch for signs of further stabilization heading into the weekend, as the world can ill afford another ugly close and long wait for Monday. Besides NOK, we would also pull out the solid sterling rally as a ray of hope that a major low in sterling versus the euro at least may have been found as the market sold EURGBP heavily on the news that the Bank of England was chopping rates to 0.1% and expanding its QE programme by £200 billion.

We will also watch for EU fiscal announcements and debt mutualization as a key sign that the EU will continue to avoid existential risks.

It will be important to watch whether the oil price has stabilized here as well, as we will need to see follow up action from the oil producers on the fearsome risk of demand dropping by as much as 8 million barrels per day or more globally over this Covid19 response. My colleague Ole S. Hansen is the place to go for updates on the outlook for crude oil.

I still tread with extreme caution here – we don’t know where all of the stresses in the system are and credit events are a further risk, even as central banks and governments scramble to contain the damage.


Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000

Contact Saxo

Select region


The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.