NOK to fall further before reversing course next year

While the Swiss and Swedish economies appear to have contracted in Q3, mainland GDP growth in Norway is chugging along nicely. And even though activity is set to slow in 2020, Norway will remain a bright spot over the coming years. This comparatively bright outlook has not prevented the Norwegian krone from sliding to record lows against the euro and the dollar this week, though. The NOK, like its Swedish cousin, tends to fare badly during times of heightened market uncertainty. But its recent decline is unusual in that it has occurred as the SEK has risen. Looking ahead, we suspect that both currencies will fall further over the next six months or so as global risk appetite fades. However, the fact that the Norwegian economy is robust enough for the Norges Bank to consider hiking rates again to support the currency gives us confidence that the NOK will recover, and will outperform the SEK, over much of 2020.