Norges Bank Review: Unchanged Today But June Cut In Store

Published 05/07/2015, 07:06 AM
Updated 05/14/2017, 06:45 AM

Norges Bank left rates unchanged at 1.25%.

As expected Olsen also stated at the press conference that a May rate cut was discussed.

We expect a single 25bp rate cut in June but that NB will leave rates unchanged thereafter.

Market reaction: rate curve lifted by 8bp across the curve. Only 7bp of cut is priced in for the 18 June meeting, which in our view is much too hawkish.

FX: EUR/NOK lower on announcement. We still target EUR/NOK at 8.55 in 1M on Norges Banks easing being priced in, and on a more symmetric oil price risk in the coming month. We target the cross at 8.40 in 3M (NYSE:MMM), 8.25 in 6M and 8.15 in 12M.

Fixed Income: We still see value in NOK rates markets as the market is now priced significantly above the Norges Bank rate path and a huge NGB redemption and coupon money is coming to the market here in May.

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