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EXECUTIVE SUMMARY: 

• Norges Bank is unanimously expected to keep the policy rate on hold at 4.25% on Thursday, while continuing to guide towards further cuts in H2.
• After surprising markets with a 25bp cut in June, macroeconomic data has broadly confirmed Norges Bank’s outlook. With the June MPR rate path consistent with “one or two” more cuts in H2 and implied probabilities tilted in favour of easing at the September and December MPR meetings, there appear few reasons to go against market consensus in August.
• We expect the primary guidance language from June to be maintained in the policy statement. With a rate hold fully priced and unanimously expected, a significant market reaction would require material deviations from the existing guidance language.
• Quarterly cuts in September and December remains the base case amongst analysts. 

• EUR/USD: Aug13 $1.1500(E2.5bln), $1.1570-80(E1.0bln), $1.1700(E1.1bln); Aug14 $1.1590-00(E1.5bln), $1.1695-00(E4.3bln); Aug15 $1.1590-00(E1.1bln)
• USD/JPY: Aug13 Y146.75-85($1.4bln), Y147.00($991mln), Y150.25($1.5bln); Aug14 Y147.00-20($1.2bln), Y148.15-30($945mln)
• GBP/USD: Aug14 $1.2975-00(Gbp1.2bln)
• EUR/GBP: Aug14 Gbp0.8690-05(E1.1bln)
• AUD/USD: Aug14 $0.6600(A$1.3bln)
• USD/CNY: Aug15 Cny7.5000($1.7bln)

• Headed into today's print, overnight vols are suitably marginally bid but exhibit pricing that stops well short of recent highs. This affirms the view that there remains a notably high bar for today's CPI print to derail any September FOMC rate cut (currently priced at 20-21bps).
• Reflecting this, USD positioning remains very soft. The outright net USD Index position at the CFTC hit a new cycle low in early August: a net short of 7k contracts for the largest net short position since early 2021 and the recovery phase from initial COVID lockdowns.
• In terms of positioning momentum, it's EUR and MXN that are most clearly benefiting from the wash lower in the net USD position. A 52w positioning Z-score for both is the highest among the CFTC panel of currencies - meaning EUR/USD and USD/MXN could be subject to the sharpest corrections if the CPI turnout today prompts a sharp reversal of Fed rate cut bets into year-end.
• We wrote last week that the USD Index remains in a bear cycle having pierced the L/T support of 96.55 - however the extent to which the market is oversold could mean a correction higher unfolds S/T, or the pace of the downtrend slows from here.