NORWAY: Easing CPI-ATE Momentum Underscores Case For H2 Easing
Jun-10 06:40
Although Norges Bank is not under pressure to cut rates due to a relatively resilient mainland economy, the unwind of Q1 inflationary pressures (which delayed the first cut back in March) suggest there is scope to ease at least once in H2 - in line with the March MPR rate path.
- Seasonally adjusted CPI-ATE prices rose 0.08% M/M for the second consecutive month in May, and have now been consistent with 2% inflation on an annualised basis since March. 3m/3m momentum pulled back to 2.95% (vs 4.11% in April, 4.22% in March) for the lowest since November 2024.
- Looking at NSA data, services excluding rents fell to 3.04% Y/Y (vs 4.31% prior). As expected, airfares were the largest contributor here, falling 9.78% Y/Y (vs +26.07% prior). However, recreation and culture and restaurant and hotels components also eased somewhat in May.
- Rents decelerated to 3.62% Y/Y (vs 3.88% prior), the lowest since April 2023.
- Domestic goods ex-energy rebounded to 5.38% Y/Y (vs 4.51% prior), while imported goods rose to 1.02% Y/Y (vs 0.31% prior). Food prices rose to 5.05% Y/Y (vs 3.12% prior), following Easter sales in April. Meanwhile, trends in clothing and footwear and furniture and household equipment remain soft. The strengthening NOK appears to be containing imported price pressures.
- Electricity including grid rent pushed up headline inflation, accelerating to 16.82% Y/Y (vs -5.21% prior) on a base effect. Norges Bank should look through this price action.
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MACRO OUTLOOK: US PPI/Retail Sales And Powell Follow On Thursday [2/2]
May-09 20:17
- Core PCE implications will then be watched closely in Thursday’s PPI report, and we expect with additional focus on portfolio management after last month’s huge upward revision to February.
- Retail sales, whilst only reported in nominal terms, will offer a keenly awaited look at consumer behavior.
- Real spending moderated to 1.8% annualized in Q1 after 4.0% in Q4 despite likely tariff front-running, with April a good test of how much discretionary spending was pulled forward.
- Finally, Powell provides “Opening Remarks” at the Second Thomas Laubach Research Conference, although he’s allotted twenty minutes so there is scope for more substantive remarks than you’d usually expect. His message at Wednesday’s FOMC press conference was one firmly of being in no hurry to cut rates amidst huge uncertainty. He also appeared to put more weight on hard data over soft indicators that appear more stagflationary in nature.
MACRO OUTLOOK: US CPI Offers Look At April Tariff Distortions on Tuesday [1/2]
May-09 20:15
- The week’s US data calendar is highlighted by CPI inflation on Tuesday although PPI inflation and retail sales reports on Thursday are in close second. All three releases are going to be important, offering further hard data for April in the first month under reciprocal tariffs. What’s more, PPI and retail sales are followed by Fed Chair Powell just ten minutes after their release (more on that below).
- Core CPI inflation is seen accelerating to 0.3% M/M in April, with six unrounded estimates we’ve seen to date averaging 0.27% M/M.
- A potential for a ‘low’ 0.3% aside, it’s still likely a swift acceleration from a particularly soft 0.06% M/M in March which was in large part down to surprisingly abrupt declines in lodging away from home (-3.5%) and airfare (-5.3%) prices.
- This lodging weakness carried over to core PCE inflation back in March, at just 0.03% M/M after a particularly strong 0.50% M/M in February in a large wedge with core CPI at 0.23% M/M.
- Markets currently price a next Fed cut with the September FOMC meeting.
USDCAD TECHS: Pressuring Resistance
May-09 20:00
- RES 4: 1.4296 High Apr 7
- RES 3: 1.4111 High Apr 4
- RES 2: 1.4041 50-day EMA
- RES 1: 1.3943 High May 9
- PRICE: 1.3930 @ 16:06 BST May 9
- SUP 1: 1.3751 Low May 6
- SUP 2: 1.3744 76.4% retracement of Sep 25 ‘24 - Feb 3 bull run
- SUP 3: 1.3696 Low Oct 10 2024
- SUP 4: 1.3643 Low Oct 9 ‘24
USDCAD has recovered from its recent lows. Despite the recovery, the trend condition remains bearish and short-term gains are considered corrective. A fresh cycle low on Tuesday reinforces the bearish theme. Potential is seen for a move towards 1.3744, a Fibonacci retracement. Note that moving average studies are in a bear mode position, highlighting a dominant downtrend. Key resistance is seen at 1.4041, the 50-day EMA.
