10 Mar 2015
Soft Norwegian CPI triggers rate cut talks, go long USD/NOK – Rabobank
FXStreet (Barcelona) - Jane Foley, Senior Currency Strategist at Rabobank, notes that with Norwegian CPI printing a soft number, and oil price at December’s levels, rate cut talks risks a softer NOK vs. EUR, further suggesting to buy USD/NOK, targeting 8.23 levels.
Key Quotes
“The Norges Bank cut the key policy by 25 bps to 1.25% on December 10 and left the door open for another move lower if the economy was exposed to a new major shock.”
“Brent crude is currently trading close to the levels of mid-December. While the move in the oil price off its low makes it difficult to argue that the Norwegian economy has experience a fresh shock since December, the Norges Bank’s Network Report highlights the risk that “lower demand from the petroleum industry will dampen growth further over the next 6 months”. Arguably, the knock on effects of the lower oil prices could be longer lasting than was expected last year.”
“This morning Norwegian February CPI data has registered a softer than expected 1.9%, with underlying CPI edging down to 2.4% y/y, below the Norges Bank’s 2.5% y/y CPI target.”
“The softer data will encourage rate cut talk and thus the risk of a softer NOK vs. the EUR ahead of the March 19 Norges Bank policy meeting.”
“While we are bearish on the NOK vs. the EUR near-term, we expect that the impact of the ECB’s QE scheme is still likely to pressure EUR/NOK lower later in the year and we would favour buying USD/NOK towards 8.23.”
Key Quotes
“The Norges Bank cut the key policy by 25 bps to 1.25% on December 10 and left the door open for another move lower if the economy was exposed to a new major shock.”
“Brent crude is currently trading close to the levels of mid-December. While the move in the oil price off its low makes it difficult to argue that the Norwegian economy has experience a fresh shock since December, the Norges Bank’s Network Report highlights the risk that “lower demand from the petroleum industry will dampen growth further over the next 6 months”. Arguably, the knock on effects of the lower oil prices could be longer lasting than was expected last year.”
“This morning Norwegian February CPI data has registered a softer than expected 1.9%, with underlying CPI edging down to 2.4% y/y, below the Norges Bank’s 2.5% y/y CPI target.”
“The softer data will encourage rate cut talk and thus the risk of a softer NOK vs. the EUR ahead of the March 19 Norges Bank policy meeting.”
“While we are bearish on the NOK vs. the EUR near-term, we expect that the impact of the ECB’s QE scheme is still likely to pressure EUR/NOK lower later in the year and we would favour buying USD/NOK towards 8.23.”