The Norwegian krone has weakened markedly over the past week. The NOK could face additional headwinds in the short-term if equity markets continue down when the Federal Reserve most probably hikes by 50bp next week, economists at Nordea report.

Risk aversion is back

“The NOK could weaken further, especially if the sour sentiment continues going into next week’s Fed meeting when they are expected to hike by 50bp and likely signals faster rate hikes going forward. Rate markets have taken this into account, but equity markets could face a reality check and fall further going forward.”

“From a technical perspective, the NOK is now oversold against the USD but not yet oversold against the EUR.”