Forex Market: USD/NOK retreats the most since February as Norges Bank signals rate hike by late 2015

The Norwegian krone advanced to the strongest level in a week against the US dollar after the Norges Bank Governor Oeystein Olsen said central banks policy makers will start raising the benchmark interest rate gradually after summer 2015, while announcing a 12th consecutive decision to keep it unchanged at 1.5%.

USD/NOK touched a session low at 5.9995 at 13:35 GMT, after which consolidation followed at 6.0009, losing 0.8% for the day. Support was likely to be received at March 19th low, 5.9503, while resistance was to be met at March 21st high, 6.0868.

The Norwegian krone strengthened against the US dollar, after the Norges Bank announced it will keep the benchmark rate unchanged at 1.50%, where it has been since central bank’s meeting on March 14th 2012, when a cut by 0.25% was introduced. However, at a speech after the decision, the Norges Bank Governor Oeystein Olsen commented that the central bank will start raising the main interest rate gradually after the summer of next year.

“Projections for the Norwegian economy show that growth will pick up somewhat further ahead,” Olsen said in a statement, cited by Bloomberg.

Meanwhile, initial jobless claims in the US fell by 10 000 to 311 000 in the week ended March 22, the weakest level since early December, data by the US Department of Labor showed on Thursday. Analysts had expected the number of Americans who file for jobless benefits to reach 323 000 last week.

In addition, the US economy expanded at a 2.6% annualized rate in the final three months of 2013, slightly below analysts expectations of a 2.7% gain, but up from a preliminary estimate of 2.4%, a report by the the Bureau of Economic Analysis showed today. The US gross domestic product grew 4.1% in the third quarter.

Data also showed that personal consumption expenditures rose 3.3% in the fourth quarter, the most since the final three months of 2010, exceeding analysts projections of a 2.8% increase and up from an initial estimate of 2.6%. Consumer spending is regarded a key economic indicator as it typically accounts for almost 70% of the US economic growth.

Strong consumer spending on services, especially in the health care sector, helped boost the expansion, a sign this years slowdown can be partly attributed to the inclement weather.

“The economy is shaking off the negative impacts from the weather,” said Sam Bullard, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina, who accurately forecast the growth in GDP, cited by Bloomberg. “We’re beginning to see signs that growth is going to gain some traction and strengthen and accelerate as the year progresses.”