NOK flows: NOK steady despite weak GDP

A quiet overnight session and very little on the calendar today except for Powell’s testimony this afternoon. Europe has kicked off with weaker than expected Norwegian GDP data, with Q4 mainland GDP falling 0.4% q/q against market expectations of a 0.2% rise. This probably doesn’t indicate a change in the trend, as the data can be quite volatile and we have seen negative quarters occasionally in recent years. But it is the weakest quarter since Q2 2020 and the pandemic, so adds pressure on Norges Bank to ease policy. EUR/NOK is not much changed initially, and while this increases the chance of a Norges Bank rate cut in March, NOK yields remain relatively high and EUR/NOK still looks attractive relative to yield spreads, so we don’t see this as a reason to look for significant NOK losses. Even so, some knee-jerk negative impact may be seen in the short run.