USD/NOK: Higher crude oil price and mild inflation lifts Norwegian krone
- The USD/NOK pair declined slightly as investors reacted to higher crude oil price and inflation data.
- According to the Norwegian statistics bureau, headline consumer prices increased by 1.3% in July.
- Factory gate inflation declined by 13.3%, which is an improvement from the previous decline of 14.4%.
The USD/NOK pair declined slightly today as traders reacted to the Norwegian inflation data and higher crude oil prices. The pair is trading at 9.0050, which is lower than last week’s high of 9.0785.
Norwegian consumer inflation ease
Consumer prices in Norway eased slightly in July as the country’s economy continued to open up. According to the country’s bureau of statistics, the headline CPI rose by an annualised rate of 1.3% in July. This was lower than the previous 1.4%. On a month on month basis, the headline CPI increased by 0.7% from the previous 0.2%.
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According to the statistics office, the increase was mostly because of a 3.3% increase in food and non-alcoholic beverages. The price of transportation services and furnishings rose by 1.5% and 1.0%, respectively. This increase was partially offset by a 2.8% decline in clothing and footwear.
The core CPI, which excludes the volatile food and energy prices, rose by 3.5% in July after rising by 3.1% in June. This increase was better than the 3.0% that analysts polled by Reuters were expecting.
In the same month, the producer price index (PPI) declined at an annualised rate of 13.3%. This decline was better than the 14.4% decline in the previous month. The PPI is an important measure of inflation, which measures changes in prices at the factory gate.
According to the bureau, the decline was mostly because of a 21.3% decline of refined petroleum products. This decline was partially offset by a 3.9% increase in food products and a 4.2% increase in machinery and equipment.
Earlier today, we reported that consumer prices in China had increased by 2.7% in July while producer prices had fallen by 2.4% in the same month.
Higher crude oil prices boost the Norwegian krone
The USD/NOK also declined because of the significantly higher crude oil prices. Brent crude oil increased by more than 1.60% while West Texas Intermediate rose by more than 2.35%. This increase was probably because of the falling oil rigs in the United States.
According to Baker Hughes, American producers slashed oil rigs to 172 as the industry continued to suffer from low prices. There were more than 600 oil rigs in operation in January this year.
The price also rose because of the falling inventories in the United States. According to the Energy Information Administration, inventories in the US decreased by more than 7.4 million in the previous week. That was better than the 2.3 million drawdown that analysts were expecting.
The USD/NOK pair tend to react to crude oil prices because of the volume of oil that Norway exports every day.
USD/NOK technical forecast
The USD/NOK pair has been in a steep downward trend after peaking at 12.1383 in March. It is now trading at 8.2090, which is close to the lowest level since June last year. The price is below the 100-day and 50-day exponential moving averages while the RSI has fallen to the lowest level in years. Also, the price is below the descending trend line that is shown in black below. Therefore, I suspect that the downward trend will continue as bears test the next resistance level at 8.500.