Forex Market: USD/NOK plummets to one-month lows on upbeat Norway’s CPI

The Norwegian krone advanced to the strongest level in a month against the US dollar, after official data revealed core consumer prices in Norway rose more than expected last month, boosting the case for Norges Bank to raise interest rates and lifting demand for the nations currency.

USD/NOK hit a session low at 5.9178 at 08:19 GMT, after which consolidation followed at 5.9262, losing 0.17% for the day. Support was likely to be found at March 13th low, 5.9122, while resistance was to be met at April 9th high, 5.9782.

Norway’s annualized index of consumer prices (CPI) rose 2.0% in March, slightly below expectations for a 2.1% increase and after a 2.1% gain in the previous month, data by Statistics Norway showed today. In monthly terms, the index rose 0.2% last month, in line with analysts estimates and following another 0.5% increase in February. It reflects the change in the general level of prices of over 650 goods and services, which the population acquires, uses or pays for consumption.

Nation’s annualized core CPI (CPI-ATE) increased 2.6% in March, up from 2.4% during the prior month and exceeding analysts projections of a 2.5% gain. In monthly terms, core CPI (CPI-ATE) rose 0.5% in March, beating analysts estimates for a 0.4% increase and after a 0.6% advance in the prior month.

This indicator is comprised by two main components – CPI-AE, which excludes energy costs and prices of raw materials, and CPI-AT, which is based on real current prices adjusted for taxes. CPI-ATE is the indicator, used by Norges Bank in order to set its interest rate policy and todays upbeat data boosts the case for the central bank to raise interest rates.

Meanwhile, the number of people in the United States, who filed for unemployment assistance for the first time during the week ended on April 5th, probably decreased to 320 000 from 326 000 in the prior week. This is a short-term indicator, reflecting lay-offs in the country. In case the number of initial jobless claims fell more than projected, this would have a bullish effect on the greenback. The Department of Labor is to release the weekly report at 12:30 GMT.

Greenback’s demand was pressured after the minutes from the March 18-19 Fed policy meeting, at which bond-buying was trimmed for a third time, revealed that some bank’s policy makers said that projections for an interest-rate increase might be overstated.

Federal Reserve Chair Janet Yellen said last month the central bank’s bond-buying program may be brought to an end this fall, suggesting borrowing costs may start rising by mid-2015.

The Federal Reserve trimmed its monthly bond-buying program by $10 billion at the last three meetings, leaving bond purchases at $55 billion per month, while maintaining its target for overnight lending between banks in a range of zero to 0.25% for six years now.