FX Update: NOK not fretting leftward shift in election. FX Update: NOK not fretting leftward shift in election. FX Update: NOK not fretting leftward shift in election.

FX Update: NOK not fretting leftward shift in election.

Forex 4 minutes to read
John Hardy

Head of FX Strategy

Summary:  The Norwegian krone is on a tear on election day in Norway as investors seem more focus on high oil prices than a leftward political shift post-election. The euro continues to slump in the wake of an indifferent ECB meeting last week, while risk sentiment tries to shake off an ugly close on Friday in the US equity market, one that put a modest bid under the US dollar while we await key US data this week, starting with the August US CPI data tomorrow.

FX Trading focus: EUR continues to wilt. NOK charges higher despite left

The euro continue to drop in the wake of last week’s indifferent ECB meeting, with EURUSD dropping today toward its last major local Fibonacci retracement level of the recent rally – the 61.8% retracement at 1.1758. Below that, and the pair opens up the range toward the sub-1.1700 lows. Elsewhere, the risk-off pattern established late Friday in FX that continued overnight has eased during Europe today as the JPY and CHF backed off a bit lower (USDJPY has become a farce and practically looks managed at this point – given the upcoming election in Japan, watching the situation closely there). I still feel the next step for more volatility is something unfolding in the rates market, with the rise in US treasury yields early last week quickly beaten back in the wake of strong treasury auctions on Wednesday and Thursday, only to see yields rising curiously on Friday despite a very risk-off session. In short, we need to keep an eye on the US treasury curve.

Norwegian election today, with much theoretically at stake. The polls suggest that the Conservative-led center-right coalition is set to lose in favour of a center-left coalition, led by the Labour party and likely including the euro-skeptic Center party and the more left-leaning Socialist left party. The Labour party has spoken against any rapid wind-down of fossil fuel energy commitment and is likely to aim for a controlled exit over a long timeframe for the sector, with investment in a green transition, etc. The key difference maker for whether we can quickly get beyond any near term uncertainty is whether the three parties receive a sufficiently strong result to manage a majority government. If not, the coalition negotiations could get drawn out as the Greens and/or Reds, with the latter an outright Marxist party while the former wants to completely wind down the fossil fuel industry by 2035 and has vowed not to support any government that won’t support its position. At the moment, NOK trades seem to fear little from the political outcome and have both eyes on current oil and especially gas prices. By the way – on the latter, please note my comments on the Russian central bank meeting and next steps for the ruble – if the gas gets flowing in a big way through the NordStream2 pipeline and takes record European natgas prices back into their previous range, this is a net negative for NOK, as Norway is reaping far more revenue at the moment from gas than oil. Month-forward natural gas prices in Europe are currently over three times their 200-week moving average.

NOK is gunning for new local highs against the euro and the Swedish krona (where parity has been in play today in NOKSEK) as the Norwegian election ends today. As noted above, investors don’t seem to be fretting any imminent shift away from investment in fossil fuels despite the nearly certain shift leftward in the new government after this election. There is the risk of a drawn-out period of uncertainty if the centre-left underperforms the polls and has to bargain for support for a minority coalition, but for now, EURNOK is gunning below the 10.20 pivot are that theoretically opens up for the massive 10.00 level again, provided politics or risk sentiment down throw up any obstacles. Interesting to see if Norges Bank eases up on the hawkish guidance if NOK aggressively bid into next week’s Norges Bank meeting and the expected rate hike it will bring.

Source: Saxo Group

Russian Central Bank hikes less than expected as it only raised rate 25 basis points rather than the widely expected 50 basis points, taking the policy rate to 6.75%. This comes after the big 100 basis point hike in the previous decision. Initially, the market took this as dovish, but it appears the Russian Central Bank is playing the game of softening its guidance while still keeping it in the direction of further tightening by indicating that it would likely tighten again in a coming meeting. This keeps their inflation-fighting credibility intact while at the same time perhaps signaling that it wants to downshift a bit to see whether the policy hikes in the bag are having the desired effect of slowing inflation in coming months. Forward rates were practically unchanged in the wake of the decision. As I mentioned on Friday, a key next step for ruble traders would be the green light from German regulators allowing natural gas sales via the just completed Nord Stream 2 pipeline – bullish RUB on the implications for new revenue streams while less so if the news quickly impacts record high natural gas prices in Europe ahead of the winter.

Table: FX Board of G10 and CNH trend evolution and strength
Note that NOK strength at odds with CAD weakness on the oil-correlation theme, although Norway’s rate expectations continue to stretch higher, while they have flattened for Canada for weeks. More volatility across the market needs to see the US dollar on the move.

Source: Bloomberg and Saxo Group

Table: FX Board Trend Scoreboard for individual pairs
Here it is worth noting the EURJPY and EURUSD bidding to turn to a negative “trend” again (note Fibo level of 1.1758 in EURUSD), while the AUDNZD downtrend at 57 days is starting to look remarkably long in the tooth and needs more fuel to keep going – not getting it with news of new covid cases in New Zealand at the weekend. USDCHF is worth a look for further developments as it is rallied hard today and is trading up near the two-month highs.

Source: Bloomberg and Saxo Group

Upcoming Economic Calendar Highlights (all times GMT)

  • Norway election
  • 2100 – South Korea Aug. Import/Export prices 
  • 0000 – Australia RBA’s Ellis, Jones to speak 
  • 0130 – Australia Aug. NAB Business Conditions/Confidence 
  • 0245 – Australia RBA Governor Lowe to speak 


The Saxo Group entities each provide execution-only service, and access to analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Inspiration Disclaimer and (v) Notices applying to Trade Inspiration, Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular, no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research 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 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. To the extent that any content is construed as investment research, you must note and accept that the 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 under relevant laws.

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

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo 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 Markets or its affiliates.

Saxo Markets
88 Market Street
CapitaSpring #31-01
Singapore 048948

Contact Saxo

Select region


Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning 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. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

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

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 are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.