Oil price decline to weigh on NOK

The commodity price falls and with it NOK, despite the fact that the effects of the oil price on commodity currencies is by no means that straight forward. 

The currencies come under particular pressure if the development of the oil price causes the market to revaluate the central bank's monetary policy direction. That is why NOK is reacting increasingly to the oil price at present. 

Following a surprisingly strong inflation development in June the likelihood of a further rate step in September fell, as Norges Bank is obliged to ensure price stability. 

"However, if there is a risk of the economy collapsing Norges Bank has got scope to allow inflation to overshoot temporarily as a sluggish economy should have a dampening effect on price developments", says Commerzbank. 

Should the PMI for July ease for the fourth consecutive month today that will initially maintain depreciation pressure on the krone.