Norwegian Krone (NOK) Forecast to Rise in 2016 Despite Oil Woes

The Norwegian Krone has proven incredibly resillient in the face of the global oil price slump thanks to the country's strong structural fundamentals, and, analysts at HSBC forecast the currency to appreciate in 2016.

Sterling's decline against NOK has come as no surprise to analysts at HSBC who have called the currency a "buy" going into 2016. 

In a recent note on the krone, HSBC's David Bloom and Daragh Maher argue the currency is set to rise in 2016 due to its solid fundamentals. 

The krone came under pressure in 2015 due to the slide in the price of oil since oil is a major export for Norway.

However, HSBC note Norway’s sovereign wealth fund is one of the largest in the world, and provides the country with a huge pot of funds ready for use in a ‘rainy day’. 

As pointed out by Maher and Bloom that rainy day has now come:

“Norway also has the luxury of being able to use fiscal stimulus to help the economy.

“It is already doing so, with a stimulus of roughly 0.7% of GDP for 2016.

“There is room for more if required.

“Norway’s Oil Fund was designed as a savings pool to be used in case of a 'rainy day' and it seems that day has arrived.”

Out of all the commodity currencies, Norway is the only one with both a fiscal and a current account surplus:

“In times of stress for commodity currencies, Norway’s strong fundamentals may belatedly be playing their part in its outperformance.

“... The NOK stands alone in having sizeable twin surpluses.”

Overall, the technicals support a continuation of GBP/NOK's downtrend beyond Tuesday as well:

The short-term down-trend supports a bearish prediction in itself, but MACD has recently broken below the zero-line and is moving lower relatively steeply, further supporting the downside bias in the charts.

If the exchange rate breaks below the 12.5591 lows it will probably confirm a continuation lower towards the major support level at 12.3221.

A break below 12.5050 would confirm a move down to a target at 12.3221 initially, followed, potentially by a move to all the way down to 12.0120.