Trump Plays Santa and The Norwegian Kroner

Yesterday and this morning:

Just when global equity markets looked to be headed for more stress due to Hong Kong, Argentina, negative growth in Germany, FX wars and the China/U.S. trade wars, President Trump rides to the rescue!  After having gone against almost all of his advisors and announcing he will add additional tariffs starting in September, he has now decided to wait until December to help Christmas shopping.  President Trump probably realized that the currency wars that have China letting its currency weaken and at the same time, China is managing the Hong Kong situation were a big part of driving equities lower these past trading sessions.  It is very clear that President Trump is concerned with the U.S. stock markets and decided to give things a bit more time since the Federal Reserve seems unwilling to play ball.

The markets went into the U.S. close last night on a positive note with the hope that a delay in tariffs and an aggressive Fed will help lift equities.

Reality is creeping back into the market this morning as equities trade lower, gold bounces higher after a correction, the VIX moves higher after yesterday’s drop.

Today we have seen weak economic news from Germany, an inverted yield curve (2yr-10yr) in the U.S., which is often a sign of a recession is coming.  Any sign of the U.S. consumer losing confidence and the equity markets will struggle.

S&P volatility seems to be here to stay as Tweets and economic news, send the index moving between 3200 and 2750

VIX index is swinging between 17.50 and 23.00   Confirming for now that the market expects higher volatility is here for a while.

The Norwegian Kroner is at a key level both technically and fundamentally:

The Technical level we see in the EurNok cross at 10.00 to 10.10  is a historically weak level for the currency pair.  This is interesting in that Norwegian rates are higher than the Eurozone.        

Brent Crude prices are holding around the $60 level, which is about the average price we have seen since 2015.  The political situation is stable, the housing market is healthy and prices are stabilizing, economic activity is holding pretty well.  So why the weak currency?

As we stated before, we believe that due to the Norwegian capital and FX markets being relatively illiquid, the currency is suffering due to the market volatility and general risk aversion mode we see being taken by investors.

Tomorrow, Norges Bank will hold an interest rate meeting, during the last meeting in June the Central Bank hiked rates by .25% to 1.25%.  Norges Bank is going alone as all other major central banks are in an interest rate cutting modus. The Bank also stated that it most likely will hike again and the market is uncertain if it will deliver given the global situation.


  1. Norges Bank keeps to it’s path and signals that they plan to hike in September based on a weak currency, inflation slightly over target and generally strong domestic economy.  50%  +NOK
  2. Norge bank confirms that a .25% hike is coming in September, but that it is likely the last hike.  25% -NOK
  3. Norges bank backs off a further hike and hints that it needs to follow global developments before moving rates higher. 20%  -NOK
  4. Norges Bank signals that due to the global uncertainty and weak growth, they hint that they are done hiking for this cycle. 5%  -NOK

We prefer to react than try to guess which way Norges Bank will approach interest rate setting in this enviornment.  Stay tuned…

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