Risk appetite is still looking fragile today, after the US dollar has rallied from an early-morning sell-off. Among the G10 currencies NOK and CHF are the best performers. Re-opening is likely to be a major theme for this week, as a number of G10 economies and US states either consider or implement lockdown easing.
NOK’s outperformance today saw EURNOK fall to its lowest level since March, representing a 16% rally from the month’s all-time lows against the euro. This morning, inflation data showed the consumer price index had risen 0.4% in April, compared to a median forecast of 0.1% on Bloomberg. The Norges Bank surprised markets with a 25 basis point cut last week, although Governor Øystein Olsen stated that “in the committee’s current assessment of the economy’s outlook and balance of risks, the policy rate will most likely remain at this level for some time ahead. We do not envisage making further policy rate cuts”. The Norges Bank’s hesitance to loosen policy further, combined with today’s inflation beat, may give the currency impetus for further momentum in the short run. Crude oil prices have opened the week lower however, and although the Brent benchmark continues to trade above $30/barrel, a sustainable rally of the sort that would trigger large scale NOK appreciation still seems distant.
Chart: Fresh lows on EURNOK
Elsewhere, EURCHF has fallen to fresh lows for the month. This comes despite fresh warnings from the SNB over the weekend that it had low appetite for further franc appreciation. SNB Governor Thomas Jordan spoke to Swiss newspapers over the weekend, sating that the bank was “more active” in foreign exchange markets and was “engaging substantially” in efforts to prevent further franc appreciation. The 1.05 level continues to be an important threshold – today’s falls therefore seem likely to prompt further action from the SNB.
Chart: EURCHF tests 1.05 level, as well the patience of the SNB
Ranko Berich, Head of Market Analysis
Ima Sammani, FX Market Analyst