Yes, the euro is struggling and Greece is a mess. Still. Time to look elsewhere for a trading idea.
Norway and Sweden both survived the financial crisis relatively unscathed, and both economies appear to be in recovery mode, according to Paul Robson, a senior foreign exchange strategist at Royal Bank of Scotland. But after a trip to the Nordic countries, Robson says he now favors the Norwegian economy and krone over Sweden.
"We returned from our trip with a more pessimistic view of Sweden, where consumers and households were starting to feel the weight of higher debt servicing costs," Robson wrote in a note to investors. "The outlook for Norway is finely balanced, with the risks skewed in favor of higher than expected interest rates and a stronger NOK."
Robson argues that Norway's central bank could deliver four interest-rate hikes - more than investors currently expect - over the next year, but Sweden's may only raise rates three times, and that in mid-2012, partly because higher interest rates there will weigh on consumers. And of course, Norway also has oil, and Robson is relatively bullish on oil prices.
It is too early to make an actual trading recommendation, Robson says. But he is watching how the two currencies are trading against each other. If they finish the week over 1.16, he told me, "confidence will increase."
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