The USD/NOK currency pair settled near recent 6-month low of 10.4290 and recorded a fourth straight week of losses in the wake of the Norges Bank’s policy decision and as a US tariff deadline drew near.
Norway’s Krone appreciated, while exerting downward pressure on the USD/NOK pair, after the Norges Bank left borrowing costs without change, having previously indicated the potential start of rate cuts.
Norges Bank kept its key policy rate on hold at 4.5% for the tenth straight meeting in March, in line with market consensus.
Policy makers noted that inflation had accelerated sharply and had remained notably higher than expectations.
“If the policy rate is lowered prematurely, prices may continue to rise rapidly,” Norges Bank said.
Still, the central bank noted that it expected to lower interest rates later this year, likely bringing the policy rate to 4% by year-end.
Meanwhile, the US Dollar weakened across the board even after data revealed a hotter-than-anticipated core PCE inflation, as it added to stagflation concerns.
Annual core PCE inflation has picked up to 2.8% in February from revised up 2.7% in January, while exceeding market consensus of 2.7%.
Annual headline PCE inflation has remained steady at 2.5% in February.
The inflation data coupled with a 0.4% increase in consumer spending, raised concerns about the Federal Reserve’s path to achieving its 2% inflation target. The data, seen as a key metric by the Fed, pushed US Treasury yields lower.
Traders also grappled with the implications of President Trump’s proposed tariffs. The announcement of a 25% tariff on imported cars and light trucks, along with threats of further levies on EU and Canadian goods, created uncertainty in the Forex space.
The USD/NOK currency pair settled 0.08% higher at 10.4618 on Friday.
The exotic Forex pair lost 0.56% for the week.
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