NORGES BANK: A Lot Of Emphasis Seemingly Placed On Unemployment Rise Since March
Jun-19 08:45
An initial observation from Bache's speech is that quite a bit of focus has been placed on the (small) rise in unemployment rates since March.
- "Unemployment has increased a bit more and been slightly higher than we had envisaged. This may indicate that there is a little more spare capacity in the economy than we assumed in March".
- This idea of more spare capacity chimes with the downward revision to the output gap in the first few quarters of the forecast horizon. Norges Bank has increased its estimate of potential output in the June MPR: "The potential output estimate has been revised up in 2025 due to somewhat higher expected growth in underlying productivity and N*"
- We had noted the increase in unemployment rates in our preview, but had expected it to only partially offset the hawkish contribution from resilient domestic demand.
This latest headline also suggests that Norges Bank have focused increasingly on spot exchange rate outcomes, rather than the broader Q2 average, in determining rate path revisions. A reminder that NOK has strengthened over the past week due to an increased oil risk premium.
- "*NORWAY'S BACHE: KRONE STRONGER PAST WEEK THAN PROJECTED MARCH" bbg
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BOE: Pill on real income resistances
May-20 08:43
Pill is now starting the Q&A.
- He went off script a bit on the welfare losses based on real income resistances (based on policymakers' beliefs vs true levels) and went into quite a bit more detail than the prepared text discusses.
- He argues that there are two-sided risks to assuming real income resistance is either too high or too low. And that there is no general result to be either too worried or not worried enough about intrinsic inflation.
OPTIONS: Larger FX Option Pipeline
May-20 08:31
- EUR/USD: May21 $1.1140-50(E1.3bln), $1.1250(E1.1bln), $1.1390-05(E2.1bln); May22 $1.1175(E1.9bln); May23 $1.1145-50(E1.1bln), $1.1180-85(E1.1bln), $1.1300(E1.0bln), $1.1330-50(E1.3bln), $1.1400(E1.1bln)
- USD/JPY: May23 Y144.00($1.4bln), Y145.00($1.9bln)
- GBP/USD: May22 $1.3260-70(Gbp1.5bln)
- USD/CAD: May22 C$1.4050($1.3bln); May23 C$1.4000-15($1.2bln)
GILT SYNDICATION: 5.375% Jan-56 gilt: Update
May-20 08:30
- Guidance unchanged: 4.25% Dec-55 gilt (GB00BT7J0241) + 1.75bp/2.25bp
- Size: GBP benchmark (MNI expects GBP5.5-8.5bln)
- Books in excess of GBP57bln (inc JLM interest of GBP3.75bln)
- ISIN: GB00BT7J0241
- JLMs: BNP Paribas, BofA Securities, Deutsche Bank, Goldman Sachs International Bank (B&D / DM) and Santander
- Settlement: 21 May 2025 (T+1)
- Maturity: 31 January 2056
- Coupon: 5.375%. Short first
- Timing: Books open, today's business (MNI expects books to close at 10:00BST)
From market source / MNI colour
