FX Update: NOK, NOK, who’s there? Energy price caps? FX Update: NOK, NOK, who’s there? Energy price caps? FX Update: NOK, NOK, who’s there? Energy price caps?

FX Update: NOK, NOK, who’s there? Energy price caps?

John Hardy

Head of FX Strategy

Summary:  The G3 currencies are chopping around aimlessly versus one another while the bigger story afoot across FX is weakness in the rest of the G10 currencies, particularly in the Swiss franc and Norwegian krone, the currencies that had formerly traded the strongest against the euro as a bit of ECB catchup on tightening guidance and easing energy prices. NOK is particularly weak today, perhaps on fears that the EU is set to cap energy and power prices and may twist Norway’s arm in the process?

FX Trading focus: EUR relief and squeeze for now, but remember longer term picture. Is NOK suddenly worried about price caps for its energy exports?

Yesterday I highlighted the squeeze risk in EURUSD If the 1.0100 area traded, but the US dollar has remained quite firm, while the real story is in the euro upside squeeze elsewhere, particularly against the Swiss franc as the ECB has gotten religion on the need to bring forward and raise its tightening plans, while the collapse in oil prices and natural gas prices to a lesser degree over the last couple of days has EURNOK shorts running for cover. Yesterday, another flurry of ECB speakers at a conference saw ECB rate expectations pulled back a bit higher as some, including Nagel, argued for a front-loading of rate hikes, which has the market leaning a big harder in favour of a 75-basis point move at next Thursday’s ECB meeting. Still, as the weeks wear on, it is important to realize that Germany being ahead of its schedule on refilling gas storage reserves doesn’t mean the country can meet anything approaching normal gas demand through the winter unless Russia turns up the gas flow rates or the gas can be sourced from elsewhere, as storage is only a fraction of the amount need for winter consumption rates as heating demand jumps.

The EU has called an emergency meeting next Friday that will likely result in a cap on electricity and perhaps also natural gas prices for some end users, a  move that will prevent many consumers and especially small businesses from going cold over the winter or going broke or having too much of their budgets swallowed by energy costs. But such a move to cap prices will also have the typical result that demand will remain higher than it would otherwise, and that will have to mean rationing of power/gas, a dicey process to manage. Either way, real GDP will decline if less gas is available, even if Russia does turn back on the gas after turning it off today for a few days of purported maintenance and continues to deliver the trickle of flows that it has been delivering recently.

The August US ADP payrolls data release today is the first using a “revamped” methodology that is meant to provide more time and higher frequency data on the labor market, as well as information on pay rises, given the ADP access to salary information. The headline release of +125k was disappointing, but it will take time for the market to trust this data point even if the new methodology eventually proved better for calling the eventual turn in the labor market. Yesterday’s Jul. JOLTS jobs openings survey was nearly a million jobs higher than expected after the prior month was revised solidly higher, suggesting a still very strong demand for labor. The USD picture is still choppy and uncertain, with today’s ADP number chopping long treasury yields back lower after they trade to new local highs. The Friday’s official jobs report will weigh more heavily, with earning surprises potentially the largest factor, while the September 13 CPI data point will weigh heaviest of all ahead of the Sep 21 FOMC meeting. As discussed in this morning’s Saxo Market Call podcast, an Atlanta Fed measure of “sticky inflation” is showing unprecedented relative strength to the BLS’s standard core CPI measure.

EURNOK has backed up aggressively higher on the huge haircut to crude oil prices over the last couple of sessions and as the ECB has delivered a far sterner message on its intent to bring forward and steepen rate tightening intentions. As well, if the EU emergency meeting sees the spotlight turned on Norway’s gargantuan profits it is earning on oil and gas profits from the reduction of Russian deliveries, the EURNOK rise could be aggravated well through the pivotal 10.00 area.

Source: Saxo Group

Table: FX Board of G10 and CNH trend evolution and strength.
The US dollar remains strong, with Euro flashing hot in the momentum higher – although questions remain how long this can last. Sterling continues its ugly slide, while CHF has lost moment likely on EURCHF flows, and NOK is losing altitude very quickly as noted above.

Source: Bloomberg and Saxo Group

Table: FX Board Trend Scoreboard for individual pairs.
USDCAD and AUDUSD are looking at interesting levels, with the former having now more decisively broken the range, while AUDUSD is teetering. Note the EURCHF and EURNOK readings trying to flip to positive here, together with other EUR pairs. USDNOK has flipped positive in rapid fashion after yesterday’s flip higher.

Source: Bloomberg and Saxo Group

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.