ECB: Consumers See Firmer 3Y Inflation, Unchanged 1Y and 5Y

NOKSEK is up 0.45% today at 0.9499, now 1.5% above Monday’s 0.9354 low. After selling off sharply in late-June (a combination of a dovish Norges Bank decision, pullback in brent crude and a technical break), the cross has consolidated between 0.9329 (June 26 low) and 0.9542 (July 3 high). A clear break of the July 3 high is required to signal a bullish theme. 

• This week’s positive momentum has been a function of:
  • Crude oil futures jumping on the new early August deadline for a Russia/Ukraine ceasefire, after Trump yesterday gave Russia 10 more days to halt fighting.
  • Digestion of the weekend EU-US trade agreement. Although this reduces near-term policy uncertainty, it will exert a toll on Sweden’s export-sensitive economy.
  • The weak Swedish flash Q2 GDP reading (0.1% Q/Q vs 0.3% cons). While the flash indicator should be taken with a handful of salt, the broad message of subdued growth momentum is supportive of market expectations for one more Riksbank cut this year.
• Swedish consumer confidence saw a notable improvement to 90.7 in July (vs 84.9 prior) this morning, but this wasn’t a market mover.
• EURNOK is down 0.2%, piercing support at the 50-day EMA (11.7647 today) at typing. A clear breach of this average would expose 11.6946, the 50% retracement of the June 18 - July 17 rally. 

A couple of background points for markets to note today, which haven’t necessarily been major needle movers during European trade, but are worth watching:

• The latest Politburo meeting readout continued to point towards ongoing support for the Chinese economy, as well as underscoring the potential for further easing. President Xi then provided follow up, highlighting risks to the economy and “effort” needed for the country to attain its ’25 economic goals. Familiar focus points, including over-competition, employment and broader market stabilisation were highlighted, with the need to expand domestic demand also at the fore. Xi reiterated the need for more proactive policy and continuity.
• The Politburo also pointed towards the acceleration of bond issuance. A reminder that the country’s Finance Minister had already suggested that China should intensify its counter-cyclical fiscal adjustments by accelerating the issuance and deployment of ultra-long-term special treasury bonds and local government special bonds.
• Elsewhere, an earthquake off the coast of Russia could be the sixth strongest on record and has triggered tsunami warnings across Japan, parts of the U.S. including Hawaii, California and Alaska, and the Philippines. The initial waves that have reached Hawaii are seemingly not “of consequence”, per local officials, although further waves are expected. Secondary waves and the risks of aftershocks from the earthquake will be monitored. Note that China has just lifted its tsunami alert for Shanghai & Zhejiang.

Of note:

USDJPY 2.38bn at 148.65/149.00 (a bit far).

AUDUSD 1.01bn at 0.6550 (a bit far).

USDCAD ~2bn at 1.3770/1.3775 (could act as magnet).

EURUSD 1.94bn at 1.1600 (thu).

USDJPY 1.52bn at 147.00 (fri).

• EURUSD: 1.1500 (613mln), 1.1510 (260mln), 1.1525 (830mln), 1.1550 (942mln), 1.1600 (330mln).
• USDJPY: 148.00 (481mln), 148.25 (230mln), 148.30 (819mln), 148.50 (547mln), 148.65 (1.1bn), 149.00 (1.28bn).
• USDCAD: 1.3770 (769mln), 1.3775 (1.25bn).
• AUDUSD: 0.6500 (463mln), 0.6525 (296mln), 0.6530 (236mln), 0.6550 (1.01bn).