NOK: Revisiting Positioning
We have been as stunned by the NOK’s continued reversal as many in markets. Regardless of our view on the economy’s fundamentals, the price action needs to be respected. The latest round of liquidation was in part triggered by the weak AKU labour market survey, which raises the stakes ahead of Friday’s Labour and Welfare Administration (NAV) unemployment estimate. One final bad print and final capitulation could ensue. On the other hand, the market is already looking for an overdue trough in underperforming output figures. Combined with adverse inflation prints Norges Bank may be compelled to become more assertive. Perceptions of a mass-clearout having taken place in longs may favour the latter view, but our positioning and flow numbers indicate otherwise.
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