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SCANDIS: NOK Outperforms Following August Inflation, Still In Focus For Norges

SCANDIS

NOK modestly outperforms the G10 this morning after today’s August inflation data. Although CPI-ATE (at 3.2% Y/Y) was in line with consensus and below the Norges Bank’s June MPR projection, markets may have hoped for a larger downward surprise given that a Kindergarten price change alone pulled the annual rate lower by 0.3pp.

  • NOKSEK is 0.3% higher today at 0.9603, with SEK also pressured by a weak domestic monthly GDP outcome this morning.
  • The technical setup in NOKSEK remains bearish though, with bulls needing to push through the 20- and 50-day EMAs at 0.9687 and 0.9751 to signal scope for a recovery.
  • The NOK real exchange rate index (‘I-44’) risen by ~2.5% so far this month, indicating a weaker currency. Given I-44 remains ~3% above the Norges Bank’s Q3 projection, it should have an upward effect on next week’s September MPR rate path.
  • Norges Bank’s sensitivity to the exchange rate was reaffirmed at the August decision, which may keep the bank leaning hawkish even as inflation tracks below forecasts.
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