The NOK Oil Proposition

The report analyzes NOK as an energy-linked currency that remains fundamentally undervalued despite recent gains. It suggests that while the long-term outlook is positive due to high oil prices, AUD offers better near-term risk-reward due to more supportive regional growth links.

Key Takeaways

• 1.NOK/SEK has functioned as a high-performing oil proxy, with vol-adjusted returns matching Crude oil longs since late February.
• 2.Norway's unique fiscal mechanism dampens daily NOK/oil sensitivity but creates a powerful long-term tailwind through future fiscal capacity.
• 3.Despite a 20%+ rally, NOK remains the second most undervalued G10 currency according to the GSDEER model.

Table of Contents

• The NOK Oil Proposition
• NOK/SEK has shone through as an oil proxy
• The complicated but powerful NOK-oil relationship
• Much less cheap, but still far from expensive
• Beware of your growth engine
• TRADE IDEAS
• Best Trade Ideas Across Assets
• The G10 FX Strategy Team
• Disclosure Appendix

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