SCANDIS: Risks To Riksbank and Norges Bank Decisions Appear Bullish For NOKSEK
NOKSEK continues to hover between the 20- and 50-day EMAs (0.9287 and 0.9380 respectively), currently 0.5% higher on the session at 0.9330. We view the risks from tomorrow’s Riksbank (0830BST/0930CET) and Norges Bank (0900BST) decisions as bullish for the cross.
- Today’s unsurprising bid in overnight vols has pushed the breakeven on an overnight straddle to 0.7% in either direction.
- On the topside, a 0.7% move would see the 50-day EMA breached and expose 0.9423, the 38.2% retracement of the Nov ’24 – Apr ’25 selloff. Key pivot resistance is defined at 0.9500.
- The Riksbank is expected to keep rates on hold at 2.25%, but we think there is scope to open the door to another rate cut later this year, conditional on downside growth risks materialising. This morning’s softer-than-expected April flash inflation reading is supportive of a dovish tilt on the margin.
- With markets currently pricing a ~60% implied probability of a 25bp cut in June, there is scope for a dovish reaction if the door is meaningfully opened to such a move – even if implicitly. (MNI preview here).
- Meanwhile, Norges Bank is likely to hold rates at 4.50% and maintain guidance that “the policy rate will most likely be reduced in the course of 2025”. (MNI preview here).
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UK: Starmer Refuses To Commit To Fiscal Rules Remaining Unchanged
Asked by Sky News whether he will commit to retaining the fiscal rules exactly as they are, PM Sir Keir Starmer demurs. Prime Minister says that the fiscal rules are very important and will not be set aside, but does not give a definitive answer to the question of whether they will be kept as-is.
- Speaking ahead of the PM, Chancellor of the Exchequer Rachel Reeves said that the gov't would stick to the rules, adding "When Britain talks about economic stability, we really mean it." However, as with Starmer she did not wholly commit to sticking to the current fiscal rules, rather than potentially altered rules in the future.
- Starmer reiterates commitment to not raising income tax, VAT or national insurance on employees.
UK: Starmer Speaks On Economy & Industry After Trump Tariffs
Prime Minister Sir Keir Starmer is delivering a speech at a Jaguar Land Rover plant in the West Midlands, his first major address since US President Donald Trump announced the imposition of 'reciprocal' tariffs last week. Livestream here. Starmer: "To carmakers, we are going to back you to the hilt". Says "this is a moment for urgency," and that "Tariffs are a huge challenge for our future, [the] global economic consequences could be profound."
- Starmer: "We are in an age of instability... This is not a passing phase."
- Starmer says the UK "Will seek the best deal with the US", Adds the UK "will work with key partners to reduce barriers to trade across the globe."
- PM says it is not just car industry that needs support, but other sectors including life sciences. Says gov't will cut timeline for clinical trials to start from 250 to 150 days, and a GBP600mln investment into health data research.
- He does not announce any specifics on retaliation to the US tariffs. The UK is not expected to launch significant retaliatory tariffs against the US, with the Starmer gov't maintaining its stance of trying to act as a bridge between the US and EU both in terms of economic talks, and on defence of Ukraine.
BOE APF SALES RESULTS: Poor result - third worst medium bid-to-cover ever
- All of the bids were confined to three gilts in that operation (with residual maturities between 10-12.5 years.
- Gilt futures are at their lows of the day, but it's hard to isolate any response to the APF result as they were already moving lower.
- That wasn't a great operation though - of the 35 medium-dated APF sales operations so far, this one had the third worst bid-to-cover.
