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U.S. Urges Japan on Monetary Policy as Yen Volatility Raises Market Concerns 
U.S. Treasury Yields Expected to Decline Amid Cooling Economic Pressures 
The NOK continued to weaken last week, and the EURNOK has traded back above the 9.80-handle going into this week, after trading as low (strong) as 9.55 two weeks ago. The main reason for the NOK weakness last week was seemingly falling oil prices and a slide in risk appetite. Norwegian data releases were slightly mixed, but mainly on the strong side.
While stock markets in both the US and Europe were robust last week, with the S&P500 ending the week up 0.2%, broader risk appetite fell, investors were cautious amid the FOMC meeting on Wednesday and in anticipation of the US labor market report on Friday.
The price for Brent oil fell last week and is currently trading below USD70/barrel, after trading as high as USD75.5/barrel two weeks ago.
While short-term interest rate expectations fell towards the end of April, thus acting as a drag on the NOK, the short-term interest rate expectations were more or less unchanged last week.
Overall, a lower conviction for further rate hikes from Norges Bank seems to have been the main reason for the NOK weakness towards the end of April, while a retreat in oil prices and slightly weaker risk appetite seems to have been the main drag so far in May.
This week, Norges Bank’s monetary policy meeting on Thursday will be front and center; however, this is an intermediate meeting, and there will be no updated economic forecasts or press conference, so market reactions should be fairly limited.
Trade updates: We book profits (38bp EUR) on the expiring 2M EUR-NOK-USD triangle (short 35D EURUSD call, short 35D EURNOK put, long USDNOK put), the structure activated in March as a vanilla expression to short EURUSD vs EURNOK correlation. Courtesy: DNB
Currency Strength Index: FxWirePro's hourly EUR spot index is inching towards -83 levels (which is bearish), while hourly USD spot index was at 87 (bullish) while articulating (at 13:31 GMT).
For more details on the index, please refer below weblink: http://www.fxwirepro.com/currencyindex
