NORWAY: Revised Budget Seen Bolstering Norges' Need for Hikes
May-11 09:41
- The expansive nature of this morning's budget revision is seen bolstering the need for further hikes from the Norges Bank in the coming months - particularly the larger non-oil budget deficit. The deficit has been revised higher to 3.0% of pension fund capital - greater than the Norges Bank assumption of 2.8%, and therefore should add upside pressure to rate path projections going forward.
- The March MPR saw rates peaking at 3.60% in Q4, but broad NOK weakness and stubborn core CPI could tilt this closer to 4.00% at June's forecasting round. Most sell-side analysts see today's budget release bolstering the case for more hikes: e.g. DNB affirm their forecast for 4% peak in Sept.
- The specific implications for NB FX selling/buying remain to be seen, but the larger deficit should equate to a slower pace of CB NOK sales on behalf of the government - cementing the market assumption for FX purchases to slow (and possibly reverse) in the coming months.
- EUR/NOK holds just above 11.4556 support (50-dma), but a break below would open further corrective activity toward 11.3582 and below. Any NOK rally would have to run further to meet the Norges Bank's FX expectations from March: The Q2 I-44 FX rate average so far is 121.46, over 1.5% off the 119.50 assumption.
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GERMAN AUCTION RESULTS: Strong Bobl auction
Apr-11 09:39
That was a strong auction for the 2.20% Apr-28 Bobl with the lowest accepted price above the pre-auction mid-price and a strong bid-to-offer/bid-to-cover. However, despite the price moving higher immediately after the results were posted, the price has moved lower now (in line with the wider moves seen in German bonds).
EUR: EUR/USD Strength Puts Prices Within Range of Key Resistance
Apr-11 09:37
- EURUSD recovery continues at typing, putting the pair at a new daily high and north of Monday's liquidity-thinned best levels.
- Futures volumes point to increased participation today, with the active future seeing activity around 20% ahead of average. EUR crosses trade more muted, signalling the extent to which the USD is driving price action so far Tuesday.
- Strength through 1.0924 opens key resistance ahead at 1.1033 - the Feb 2 high. Relatively little in the way of option interest ahead of today's NY cut, which should keep focus on more sizeable expiries at $1.08, $1.09 and $1.10 on Thursday.
OUTLOOK: Price Signal Summary - S&P E-Minis Short-Term Trend Needle Still Points North
Apr-11 09:35
- In the equity space, S&P E-Minis remain in an uptrend. Price has recently breached resistance at 4119.50, the Mar 6 high, reinforcing a bullish theme. The move higher has also resulted in a break of 4148.48, 76.4% of the Feb 2 - Mar 13 downleg. This signals scope for an extension towards 4205.50, the Feb 16 high ahead of 4244.00, the Feb 2 high and a key M/T resistance. Firm support lies at 4050.52, the 50-day EMA.
- EUROSTOXX 50 futures maintain a firmer tone and the contract has traded to a fresh trend high today of 4299.00. Price has recently breached resistance at 4268.00, the Mar 6 high and a key hurdle for bulls. The break of this level strengthens bullish conditions with sights on 4300.00 and 4324.50, the Jan 13 2022 high (cont). Moving average studies are in a bull-mode set-up and this highlights a broader uptrend. Initial firm support lies at 4180.90, the 20-day EMA.
