Norwegian Krone: Norges Bank's surprise hike and risk support – HSBC

HSBC reports that the Norwegian Krone (NOK) has gained alongside other risk-on currencies versus the Dollar, supported by improved sentiment and domestic policy. Norges Bank surprised markets on 7 May with a 25bp hike to 4.25%, its first since 2023, but HSBC’s economists see a prolonged hiking cycle as unlikely, contrasting this with the continued wait-and-see stance of regional peers.

Norges Bank diverges from regional peers

"In addition to the broader shift in risk appetite, both the AUD and NOK appear to have benefited from domestic policy developments."

"The Norges Bank surprised markets on 7 May by raising its policy rate by 25bp to 4.25%, marking its first hike since 2023."

"As the Norwegian central bank indicated that its policy outlook has not changed materially, our economists view a prolonged hiking cycle as unlikely."

"In contrast, regional peers, including the European Central Bank, the Bank of England and the Riksbank, still adopt a wait-and-see approach."

"While recent price action is broadly consistent with these developments, it is important to monitor any sustained energy disruption that could trigger a renewed “risk-off” shift and strengthen the USD."