NORGES BANK: Heightened June Cut Expectations Keeps Focus On May Guidance

We haven’t seen an obvious domestic driver for this week's ~10bp narrowing in the 2-year NOK-EUR swap rate differential, with the spread now at 208bps. Norwegian markets were closed between last Wednesday afternoon and Easter Monday, so the move may represent a delayed spillover from last week’s dovish ECB decision. 

• Markets now price ~20bps of easing into Norges Bank’s June 19 decision, up from less than 10bps just after the March 27 meeting, where rates were left on hold at 4.50%.
• It’s hard to rule out a June cut at this stage, particularly after Norges Bank went against prior guidance for a 25bp March cut at the last decision. Since then, March CPI-ATE was in line with Norges Bank and analyst consensus at 3.4%, and while Norway is less directly exposed to US tariffs than the likes of Sweden, it is indirectly impacted via weaker global growth prospects.
• Governor Bache’s characterisation of risks at the May 8 decision will be key in gauging whether the Norges Bank easing cycle will begin in June or September. The March MPR rate path was consistent with 2x25bp cuts in 2025.
• The risk/global growth-sensitive NOK weakened considerably in the week following the April 2 US tariff announcement, with EURNOK reaching a multi-year high of 12.2223 on April 11. The cross has since fallen back to ~11.8380, in conjunction with a partial recovery in Brent crude prices.
• A clear breach of the 20-day EMA at 11.8297 would signal an extension of the current corrective pullback in EURNOK, with the 50% retracement of the April 2 – Apr 11 rally at 11.7418 the next downside target.