What just hit the fan?
EURNOK traded around 7.40 these days last year. Those were also the days when the consensus call for EURNOK 4q 2013 was 7.18. Having seen 8.20 last week it doesn’t take a rocket scientist to understand that something has happened. During 2012 we could read how “this time was different” and NOK would keep getting stronger and stronger since our economy with no net government debt would be the safe haven. With zero interest rate in most large currencies and QE from Fed the carry trade kept NOK strong even after Draghi made the guarantee for the Euro.
The demand for the safe haven diminished with European Sovereign CDS coming down late summer 2013. The carry trade has taken some serious beating this year in a market that fears tapering from FED. With Norwegian macro and in particular Norges Bank disappointing as well we had the perfect NOK-storm.
Read the full report: FX Research
Nordea