NOK: Softer data do not derail Norges – Nomura

At yesterday’s meeting, Norges Bank kept rates unchanged and reiterated that rate hikes will likely come “after summer 2018”, while the statement showed limited changes to the outlook since the March meeting, explains the research team at Nomura.

Key Quotes

“The statement was interpreted as slightly hawkish by the market. On the whole, data have been on the disappointing side and some were looking for a small pushback from Norges Bank today. However, as we expected, Norges Bank showed a willingness to look through recent weakness in the data and NOK has seen a modest rally around the release.”

“Key takes: Willing to look through the negatives

(-) Overseas demand slightly weaker which could be negative for the growth outlook. Trade and geopolitical tensions clearly higher.

(-) NIBOR premium has risen (but is expected to fall again).

(-) Inflation has come in below forecasts (but overall assessment of trajectory remains positive, in line with our own – see Fig. 1).

(+) Oil prices higher, exchange rate slightly weaker than forecast.

(+) Wage negotiations in line with projections.

(+) Housing market shows continued signs of stabilising.”

“Overall, yesterday’s meeting was consistent with our view that Norges Bank is determined to get rates to more normal levels. We continue to see the balance of risks skewed towards an earlier rate rise than market expectations at the September meeting.”

“Remaining long NOK/SEK targeting 1.14

We stick to our long NOK/SEK positions, looking for a move towards 1.14. In terms of the next NOK catalysts, Inflation prints remain important, with the next CPI release on 9 May. Statistics Norway oil investment survey (28 May) and Norges Bank Regional Network Survey (12 June) are the other key releases ahead of the 21 June policy meeting, at which forecasts will be updated.”