USD/NOK: Strong Norway GDP data points to sooner rate hike
- The USD/NOK declined after the relatively strong Norwegian GDP data.
- The economy contracted by 2.5% in 2020, outperforming peer countries.
- The data points to a sooner rate hike by Norges Bank.
The USD/NOK is on track for its second straight week of losses as forex traders react to the relatively strong Norwegian GDP data. The pair is trading at 8.4935, which is close to its lowest level since November 2018.
Norway strong GDP data
The Norwegian economy had a strong fourth quarter, according to the latest numbers by the Norwegian statistics agency.
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The country’s economy increased by 0.6% in Q4 after rising by 4.5% in the third quarter. This was a better performance than the median estimate of a 1.2% increase. On an annualised basis, the economy expanded by 1.4% in the quarter.
The accomodation and food services sectors contracted by 16% because of limited international travel. Other sectors that were worst affected were arts and entertainment. On the other hand, the best performing sectors were the administrative and support services. The oil and gas industry also did well.
Still, because of the pandemic, the economy contracted by 2.5% in 2020. This performance was better than that of most countries. For example, data by the Office of National Statistics (ONS) revealed that the economy declined by 9.9%, the worst performance in 300 years.
The USD/NOK pair dropped because these strong numbers are signaling that the Norges Bank will hike interest rates faster-than-expected. In its recent interest rate decision, the central bank hinted that rate cuts will come earlier than expected. In a note, an analyst at DNB Markets said:
“The mainland growth data indicate that the economy has managed the pandemic better than expected. The figures support the view of an earlier rate hike than Norges Bank has suggested.”
The USD/NOK has also declined because of the overall strong crude oil prices. The price of Brent has surged to above $60 while that of West Texas Intermediate (WTI) is approaching this milestone.
USD/NOK technical outlook
The daily chart shows that the USD/NOK price has been on a downtrend for months. However, it has found a strong support at 8.3646, which is below the 15-day and 25-day moving averages. The Relative Strength Index (RSI) has also been wavering at the neutral level of 45. Therefore, the pair may continue falling as bears attempt to move below the support at 8.3646.