NORGES BANK: JPMorgan: Clues About a Potential Faster Tightening Pace Will Be in Focus
May-05 05:33
- This week’s meeting is a “small” meeting and hence neither a monetary policy report is released nor a press conference held. Markets see a limited risk of Norges Bank hiking rates and we also attach a very low probability to such an outcome - especially since the March core inflation printed well below expectations. We thus project an unchanged rate at 0.75%, with the statement reiterating that “the policy rate will most likely be raised in June”.
- The last statement in March also included the sentence that “if there are prospects of persistently high inflation, the policy rate may be raised more quickly”. Markets will therefore be looking for clues of whether Norges Bank sees an increasing probability of either hiking rates at one of the upcoming smaller meetings (on top of the flagged rate hikes at MPR meetings) or going by 50bps at a single meeting. However, as news has been mixed since March, we do not think Norges Bank will change its forward guidance.
- Our main scenario is though that Norges Bank will continue hiking only at MPR meetings until the policy rate reaches 2.25% in 2023. In our view, the bar to breaking the quarterly pace is still relatively high. This was demonstrated by the March rate path showing the “judgment component” lowering rate expectations in 2022 by 27bps on average, reflecting concerns related to households’ response to higher interest rates.
- In essence, Norges Bank fears moving more quickly could have a large adverse effect on the housing market. Also, our macro forecast does not suggest an urgent need to raise rates more quickly, as e.g. core inflation should fall back toward the end of 2022 and continue sliding into in 2023.
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USDJPY TECHS: Short-Term Outlook Remains Bearish
Apr-05 05:27
- RES 4: 126.26 3.382 proj of the Dec 3 ‘21 - Jan 4 -24 price swing
- RES 3: 125.86 High Jun 5 2015 and a major resistance
- RES 2: 125.28 High Aug 12 2015
- RES 1: 123.20/125.09 High Mar 30 / High Mar 28 and the bull trigger
- PRICE: 122.52 @ 06:26 BST Apr 5
- SUP 1: 121.28 Low Mar 31
- SUP 2: 120.95 Low Mar 24
- SUP 3: 120.36/00 20-day EMA / Round number support
- SUP 4: 119.44 Low Mar 22
USDJPY is trading above last week’s low of 121.28 on Mar 31. A corrective cycle continues to dominate following last week’s pullback from 125.09, Mar 28 high. 121.28 represents a key short-term support. A break of this level would allow for an extension lower and open 120.95, Mar 24 low ahead of the 120.00 handle. On the upside, initial resistance is seen at 123.20, the Mar 30 high with the bull trigger unchanged at 125.09.
US TSYS: A Little Cheaper & Steeper In Asia
Apr-05 05:26
Tsys have cheapened a touch overnight, initially on the back of a BBG sources piece which suggested that the U.S. Tsy’s move to block Russia US$-debt payment via U.S. banks doesn’t necessarily mean default (after the initial headlines on the matter provided a very modest bid), although that is listed as one of the potential aims of the move, with other options available to Russia including a drain of US$ reserves held in Russia or spending freshly acquired revenue, per the source report.
- Impetus from a hawkish RBA decision in Australia also played into the weakness ahead of European hours, with the curve steepening in both twist and bear manners during Asia-Pac dealing, as regional participants reacted to Monday’s NY session.
- Also note that WTI & Brent futures are off best levels of the session, but still over a $1/bbl firmer on the day.
- TYM2 is -0-03 at 122-00, 0-02+ off the base of its 0-12+ range, while cash Tsys are 1.0-2.5bp cheaper across the curve, bear flattening (As mentioned).
- Flow was headlined by a screen lift of the of the EDK2 98.3750/.3125 put spreads (+10K over a few clips)
- NY hours will be headlined by the latest ISM services survey, in addition to Fedspeak from Vice Chair Brainard, NY Fed President Williams & San Francisco Fed President Daly (’24 voter).
UK: Timeline of key events (Times BST)
Apr-05 05:23
| Date | Time | Period | Event |
| 05-Apr | 0930 | Mar | IHS Markit/CIPS Services PMI (Final) |
| 06-Apr | 0930 | Mar | IHS Markit/CIPS Construction PMI |
| 07-Apr | 1315 | ---- | BOE Pill Opening at BOE Sovereign Bond Market Conference |
| 11-Apr | 0700 | Feb | Construction Output/Index of Services/Trade/Monthly GDP |
| 11-Apr | 0930 | Feb | Index of Production |
| 12-Apr | 0001 | Mar | BRC-KPMG Shop Sales Monitor |
| 12-Apr | 0700 | Feb | Labour Market Survey |
| 13-Apr | 0700 | Mar | Consumer Inflation Resort / Producer Prices |
| 13-Apr | 0930 | Mar | ONS House Price Index |
| 14-Apr | 0001 | Mar | RICS House Prices |
| 22-Apr | 0001 | Apr | Gfk Monthly Consumer Confidence |
| 22-Apr | 0700 | Mar | Retail Sales |
| 22-Apr | 0930 | Apr | IHS Markit Manufacturing / Services / Comp. PMI (flash) |
| 26-Apr | 0700 | Mar | Public Sector Finances |
