The value of the Norwegian krone (NOK) could face challenges if Donald Trump secures the presidency, according to a recent analysis. The report highlights a close negative correlation between the dollar and the NOK, which could be affected by potential changes in U.S. policies.
Currently, strong economic indicators are pushing U.S. interest rates higher, strengthening the dollar and weakening the NOK in the short term. Analysts expect a stronger NOK through 2025, assuming continued rate cuts from the Federal Reserve. However, with Trump as president, this trend may not persist.
Trump's proposed trade, immigration, and fiscal policies are viewed as inflationary. He plans to impose a 60 percent tariff on Chinese imports and a 10 percent universal tariff on all imports. This move is intended to encourage domestic production but could raise consumer prices.
Additionally, Trump's immigration policy aims to deport many unauthorized immigrants working in the U.S., potentially increasing wage costs due to labor shortages.
A study by the Peterson Institute for International Economics predicts a 4-7 percentage point increase in inflation through 2025 if Trump is elected instead of Harris. Higher inflation would drive U.S. interest rates up further, supporting a stronger dollar.
Market attention has shifted towards the U.S. election outcome recently. The correlation between Trump's election odds and the dollar's strength has been notable, particularly throughout October.
Despite uncertainty surrounding election results, analysts believe that current market pricing does not fully account for a potential Trump victory. If elected, they foresee an upside risk for the USD and corresponding downside risk for the NOK within the next year.
While Trump's win might boost the dollar short-term, long-term effects remain uncertain due to possible GDP impacts from his policies. Retaliatory tariffs from other countries could also affect U.S.-Norwegian economic relations.
In conclusion: A Trump victory may strengthen the USD while weakening NOK in the near future; however, long-term implications depend on policy implementation and international responses.