Interest rate differentials between Norwegian government bond yields and Swedish government bond yields have now started moving in favour of Norway, on a rate of change basis:
Here you can see the correlation between the FX spot and the interest rate differentials
Norwegian Krona acts as a commodity currency, benefiting from stronger oil prices.
Norway also has a unique situation where their sovereign wealth fund has most of their assets denominated in foreign currencies. Thus, drawing down on them to do fiscal creates this weird scenario where the NOK strengthens as they do more fiscal.
Swedish Krona I like to think of as a readout on Swedish technology companies, growth stocks that benefit from a low interest rate world,
A quick and dirty way I like to gauge the SEK is simply to compare USDSEK (Inverted) against the OMXS (Swedish stock index). Yeah, I know the OMXS is mainly made of manufacturing companies, but tech+telecom also contributes a fair portion to it.
Interest rates in Sweden, (Not just the US, and in fact, most countries are experiencing spikes in yields) are on the rise and probably put a bit of a damper onto growth type stocks in Sweden => Negative for Swedish tech and Negative for Swedish Krona.
Finally looking at NOKSEK itself, appears to have broken out of an ascending triangle pattern
I don't expect oil to keep rising in this environment indefinitely, but do see some short term tailwinds with the shut down of a lot of US shale companies post Saudi-Russia price war fiasco + blowing up of high yield credit during CoVID crash.
Reasons to get out:
1) Oil crashes or Swedish interest rates start turning down severely.
2) NOKSEK reaches 1.13 - This is just a rough take-profit I have in mind based on the chart pattern. I doubt NOKSEK actually reaches it but I set this as a TP regardless.
As always, share your thoughts, prove me wrong.