Trade Corner
The Case for the NOK
by Macro D
This idea of commercial exchange has distant and silent roots.
October 2019: I remember those days well. At the time, we were facing a dynamic decrease in the Norwegian krone, and I was in front of the screens, asking myself: But why? On September 19, 2019, the Norwegian central bank had (sensationally) raised its reference rate, in total disagreement with the major central banks of the world that were lavishing themselves with expansionary monetary policies. This increase was the fourth after the one on September 20, 2018.
Meanwhile, in response to the decline in oil and other commodity prices, the central bank revised its GDP growth forecast for 2019 from 2% to 1.3%. Simultaneously, the Norwegian pension fund initiated a strategic shift, diligently disposing of assets primarily focused on the extraction or processing of these commodities.
Well, with this preamble, we touched on two realities that I consider fundamental: 1) the Norwegian central bank is capable of making meaningful choices (for example, raising interest rates when other central banks lower them), and 2) The Norwegian sovereign fund which, by its managed assets and its proverbial ability to influence the surrounding monetary fabric, has become the deus ex machina (the carousel operator) of the fate of the Norwegian crown.
Let’s explore in more detail …