EUR/NOK, NOK/SEK flows: NOK still sees correction risks given oil reset
NOK still seems to be lagging the reset seen in oil, suggesting bigger correction risks
Oil remains significantly lower on the back of the step-adjustment to progressive political developments discussed in various dailies and weeklies - US reach out into the elections, the US and Israel election results, intermediary talks, and Trumps comments suggesting further strikes are very unlikely.
Brent front month is back to $90 off $25-30 in a week and a half and with Aug $85~ lows below ahead of any further step move down to the prior $80-70 band. While prices can move in a moment on a rhetoric shift, and resolving financial and nuclear issues remains as tough as ever, the large re-pricing of scenarios and their probabilities arguably still hasn't fully translated into adjustment of the NOK oil-trade premium. Indeed, NOK traded in tandem with high risk counters yesterday before some correction showing in today's session. Looking at crosses such as EUR/NOK (and of course ignoring other factors such as changes in spreads), current FX rates still look to be lagging the re-weighting seen in oil by a large margin, with scope for the cross to extend its bounce, especially if profit-taking on shorts gathers some momentum by taking out stops.
EUR/NOK has 10.7-8 above 10.6, with scope to nearer 11 on a more sizeable reset if the current oil drop can cement and extend.
Today's Norway CPI meanwhile sees core inflation drop to 2.7% from 3%, below market of 2.8%, if still elevated. Oil outlook much more directly and indirectly relevant to the outlook than the latest spot print though.