Currently, the world is convinced that most of the major central banks in the world either do not intend to raise interest rates, or are going to cut them. The last group includes the FED and the European Central Bank. However, there is one bank which raised interest rates and may intend to continue the cycle of monetary policy tightening.
It is the Bank of Norway (Norges Bank), which started a cycle of interest rate increases in September 2018. Before that date, the main interest rate in Norway was 0.5 percent. It was one of two interest rate increases. Another took place in March 2019, where the main interest rate was increased from 0.75 percent up to 1 percent. Currently, it is expected that the interest rate may raise from 1 percent up to 1.25 percent, and Norges Bank seems to be the only major central bank that decides to tighten its monetary policy.
It is possible, however, that this might not be the last rate hike this year. There is a chance that the Bank of Norway could signal another - later this year. Nevertheless, the path for further increases in 2020 may be less steep because of the lower oil prices and the global approach to monetary policy of other central banks.
Interest rates in the long term may affect trends in the currency market, hence it is worthwhile to look at the divergence we are now observing. The US dollar, euro or Swedish crown are currencies whose central banks may leave interest rates unchanged or cut them. Meanwhile, the Norwegian crown is the currency for which interest rates could rise. It seems that it is worth paying attention to such pairs as USD/NOK, EUR/NOK or NOK/SEK.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal Opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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